A renewed parliamentary push to review taxes on mobile money has reignited debate over whether Uganda’s tax regime is making digital financial services more expensive and slowing the country’s drive towards financial inclusion.The debate follows recent amendments to the Income Tax Act introducing a 10 per cent final withholding tax on commissions earned by telecommunications agents.Although the tax is levied on agents rather than customers, industry players argue that many agents are already passing the additional cost on to consumers through higher service charges.The new measure adds to several existing taxes imposed on Uganda’s telecommunications sector. Consumers already pay a 0.5 per cent levy on mobile money withdrawals, transaction charges imposed by telecom operators, a 15 per cent tax on those operator fees, a 12 per cent excise duty on airtime and internet data, and an 18 per cent Value Added Tax (VAT) on telecommunications services.Entry-level smartphones also attract import duties and VAT, increasing the cost of accessing digital services. Civil society organisations argue that the cumulative effect of these taxes has made mobile money among the most expensive financial services in the region, discouraging low-income households from using formal digital payment systems.Civil Society Budget Advocacy Group (CSBAG) executive director Julius Mukunda said the latest tax on telecom agents could further undermine financial inclusion, particularly in rural areas where mobile money agents serve as the primary point of access to financial services.According to Mukunda, many people already avoid depositing money into mobile wallets because they anticipate losing part of it through withdrawal charges. He argued that taxing agents’ commissions is likely to increase operating costs, which may ultimately be passed on to customers.The Uganda Communications Commission (UCC) has also previously warned that high taxation is slowing the country’s digital transformation.According to the regulator, Uganda’s layered tax structure suppresses demand for internet services, increases the cost of digital transactions and widens the digital divide.Among the reforms proposed by the UCC are the removal of transaction charges on small mobile money withdrawals, elimination of VAT on mobile internet services, reduction of excise duty on low-cost data bundles and lower import taxes on affordable smartphones.The regulator argues that reducing these costs would encourage greater uptake of digital financial services and internet connectivity.The debate has now returned to parliament after Budadiri East MP Julius Nakiyi was granted leave to prepare legislation seeking to review taxes on mobile money transactions.Nakiyi argues that the current withdrawal levy effectively taxes people’s own money rather than economic activity and undermines one of the government’s objectives under the Tenfold Growth Strategy of expanding digital financial inclusion.Industry observers note that Uganda imposes one of the region’s heavier tax burdens on telecommunications services. In neighbouring Kenya, for example, taxation is largely applied to service fees charged by operators rather than the value of money being withdrawn or transferred.The post New telecom taxes renew debate on financial inclusion appeared first on The Observer Media Ltd.