There and Back Again: The Making of Uganda’s Mobile Money Tax

Mobile money is widely seen as a powerful tool for enhancing financial inclusion and, potentially, improving the economic well-being of the poor. As the mobile money sector, and its turnover, have grown, certain governments have increasingly viewed mobile money transactions as a potentially convenient tax handle. The resulting tax measures are often controversial and draw sharp criticism from those who fear that they will undermine the growth of digital financial services. The case study of Uganda highlights an interesting example of this trend and demonstrates the importance of careful tax policy design. In early 2018, there was a consensus that Uganda’s tax effort remained some way below its revenue potential, and there was pressure to find new revenue sources. In July 2018, the government introduced an especially contentious new tax of 1 per cent on the value of all mobile money transactions, one of several excise duty amendments designed to increase revenue from the telecommunications and financial sectors. After widespread public outcry and significant implementation challenges, the tax was amended in November 2018 to apply only to mobile money withdrawals at a rate of 0.5 per cent.