While Uganda has made significant strides toward building a digital economy, questions on whether taxes on smartphones may be slowing digital adoption linger, with experts and civil society calling for the removal of taxes on entry-level smartphones as a way of reducing their prices and easing access, especially for low-income earners.
They say that the current tax policy of a 10% import tariff and 18% VAT is not aligned with the country’s digitization agenda.
Across Uganda’s towns and cities, smartphones are increasingly becoming essential tools for everyday life.
But for many Ugandans, the price of owning one remains a challenge. Joab Twinembabazi has been in the business of importing smartphones for the past five years, and he opens up on why the prices are high.
Joab Twinembabazi, a phone dealer, says the taxes on imported smartphones are high, including on entry-level smartphones, mostly from China.
“Taxes at the airport are too much. If you purchase a smartphone maybe at a China price of 70,000 shillings, you reach the airport and find that they want an additional 70,000 shillings or more,” Twinembabazi said.
Analysts say device affordability continues to limit growth.
Emmanuel Ssemugenyi, a tax lecturer at Kyambogo University, said that smartphones are essential.
“Currently in Uganda, smartphones are no longer just for leisure; they are part and parcel of how we conduct business. Therefore, from a tax perspective, the government should think of a way to ensure that in the digital economy, every Ugandan has a smartphone,” Ssemugenyi argued.
Part of the concern centers on the taxes applied to imported smartphones and digital services.
“Different initiatives can be adopted. For example, they need to exempt low-cost smartphones. Just like we have PAYE and rental income tax thresholds, there must be a minimum price below which someone acquiring a smartphone may not be taxed for such an entry-level device,” Ssemugenyi noted.
Some estimates suggest that only about one in three mobile phone users in Uganda owns a smartphone, leaving millions dependent on basic feature phones. Civil society groups argue that tax reforms could unlock wider digital access and its benefits.
Hilda Tumuhe, a fiscal policy analyst with SEATINI Uganda, told us that the government needs to listen to its experts.
“We advise governments to subsidize the cost of smartphones. Of course, subsidization comes with a reduction in tax or withdrawal of a tax on such a product,” Tumuhe added.
With Uganda positioning itself as a regional technology hub, experts say the structure of digital taxation could play a major role in determining how quickly the country connects millions more citizens.
“Government can look at a scenario where they cease to tax access to smartphones but instead tax the value they create. People use smartphones and create wealth—you tax the digital business income generated, you tax all other aspects of revenue created as a result of having a smartphone, instead of just focusing on the phone itself for taxation,” Ssemugenyi argued.
Reducing taxes on smartphones can increase digital inclusion, expand e-commerce, and eventually grow government revenue through a larger digital economy.
