As Uganda accelerates its transition toward a digital economy, concerns are growing that the cost of accessing and using digital services is becoming increasingly unaffordable for millions of ordinary citizens.
From online learning and digital banking to social media marketing and e-commerce, internet connectivity has become central to modern life. But experts now warn that two major barriers continue to slow digital inclusion in Uganda: the high cost of entry-level smartphones and taxes imposed on mobile money transactions.
The debate has re-emerged following government’s latest tax proposals presented to Parliament by the Ministry of Finance, which continue to maintain taxes on imported smartphones, including low-cost entry-level devices.
According to Julius Mukunda, the Executive Director of the Civil Society Budget Advocacy Group (CSBAG), taxing smartphones undermines Uganda’s efforts to build an inclusive digital economy.
“A smartphone today is no longer a luxury item. It is a productive tool for business, education, communication and access to government services. Taxing entry-level smartphones is effectively taxing opportunity,” Mukunda said.
Mukunda further argued that Uganda continues to move against regional recommendations encouraging East African countries to reduce taxes on digital devices in order to improve internet penetration and digital participation.
“The East African regional framework has consistently encouraged member states to make smartphones more affordable, especially for low-income earners and young people. Uganda is moving in the opposite direction,” he added.
Experts say the continued taxation of entry-level smartphones disproportionately affects young people, startups, students, and low-income communities who rely heavily on affordable digital tools to participate in the economy.
Data from the Uganda Communications Commission indicates that although internet and network coverage across the country has improved significantly over the years, affordability remains one of the biggest barriers preventing millions from fully participating in Uganda’s digital transformation.
According to Ibrahim Bbosa, Head of Public and International Affairs at UCC, connectivity alone is not enough if citizens cannot afford the devices needed to access digital services.
“We have seen tremendous expansion in broadband and network infrastructure across Uganda, but affordability of devices and services remains one of the biggest barriers to internet usage,” Bbosa said.
Government however insists that efforts are underway to gradually lower the cost of connectivity and improve digital access nationwide.
Chris Baryomunsi, Uganda’s Minister for ICT and National Guidance, says government remains committed to expanding digital inclusion.
“Government is continuously investing in ICT infrastructure and policies aimed at lowering the cost of internet and increasing access to digital services across the country,” Baryomunsi said.
But beyond smartphones, frustration is also growing around taxes charged on mobile money withdrawals.
Business owners and informal traders say the 0.5% excise duty on mobile money cash withdrawals is steadily increasing the cost of doing business at a time when many Ugandans are already struggling with high living costs.
John Walugembe, Executive Director of the Federation of Small and Medium Enterprises, says the tax is discouraging digital transactions among small businesses that heavily depend on mobile money platforms for daily operations.
“Small businesses rely heavily on mobile money because many operate outside formal banking systems. But every withdrawal attracts charges and taxes, which gradually reduce already small profits,” Walugembe said.
He argues that reducing or halving the withdrawal tax would encourage greater use of digital payments and strengthen financial inclusion.
“Reduced the excise duty of 0.5% to half , 0.25% on mobile money withdrawals, it would encourage more people to remain within the digital financial ecosystem instead of reverting to cash transactions,” he added.
Economists now warn that unless government revisits taxation policies on both smartphones and mobile money, Uganda risks slowing down its own digital transformation agenda.
Policy advocates argue that reducing taxes on entry-level smartphones and easing the burden on mobile money users could unlock broader economic growth by expanding access to online business, digital education, innovation, and financial services.
As Uganda pushes toward a technology-driven future, analysts say the real challenge is no longer whether digital transformation will happen, but whether ordinary citizens can afford to participate in it.
