UCC Proposes Major Telecom Tax Cuts to Boost Uganda’s Digital Economy

A comprehensive study commissioned by the Uganda Communications Commission has proposed sweeping tax reforms aimed at accelerating Uganda’s digital economy by lowering the cost of internet access, expanding infrastructure investment, and stimulating broader economic growth. The report, titled “Impact of the Current Telecommunications Taxation Policy on the Communications Sector,”  argues that Uganda’s current telecommunications tax structure is among the most burdensome in East Africa and is limiting broadband adoption and slowing digital transformation.

The study notes that consumers and operators currently face multiple overlapping taxes, including a 12% excise duty on internet data, an 18% Value Added Tax (VAT), a 0.5% levy on mobile money withdrawals, and import duties on ICT devices and network equipment. According to the report’s econometric analysis, this tax-heavy environment has reached a point where it is no longer generating optimal economic returns. Instead, it is suppressing demand for digital services and limiting the sector’s long-term contribution to GDP, despite sustaining short-term government revenue.

To address these challenges, the report recommends a shift away from high upfront access taxation toward a more consumption-driven and growth-oriented fiscal model. It argues that telecommunications should be treated as a foundational sector for development rather than a luxury service, given its central role in education, financial inclusion, healthcare, and innovation under frameworks such as Digital Uganda and National Development Plan IV (NDP IV).

Among its key proposals, the study recommends reducing excise duty on data and airtime from 12% to 5%, a move projected to significantly lower retail prices and increase internet usage across the country. It also proposes reducing VAT on mobile data from 18% to 14% in the short term, with a longer-term consideration of partial or full VAT removal on data services, based on simulations showing strong gains in subscriber growth and economic activity.

The report further calls for targeted tax relief on entry-level 4G and 5G smartphones by eliminating or reducing import duties, excise taxes, and VAT on approved devices. This is intended to close Uganda’s device affordability gap and expand digital access, particularly among low-income households. In addition, it recommends reclassifying internet access as an essential public service, aligning Uganda’s policy framework with global best practices that recognize broadband as a critical infrastructure for modern economies.

Infrastructure development is also a central focus of the proposed reforms. The study suggests introducing capital expenditure incentives, including VAT exemptions on telecom towers, power systems, and backhaul infrastructure, specifically targeted at rural and underserved regions. This, it argues, would reduce rollout costs and encourage operators to expand network coverage more aggressively outside urban centers.

Ultimately, the report concludes that lower and more streamlined telecom taxation would expand the user base, increase data consumption, and generate stronger long-term fiscal returns through a wider and more productive digital economy. It encourages policymakers to view telecom taxation as a development tool rather than a short-term revenue mechanism, drawing comparisons with more advanced digital economies such as South Korea. The proposed reforms are expected to be implemented in collaboration with the Ministry of Finance, Planning and Economic Development and the Uganda Revenue Authority as part of a phased policy transition.