By Tabitha Nafula, Martin Luther Munu, & Isaac Shinyekwa 

Many developing countries in Africa have a low tax to Gross Domestic Product (GDP) ratio with that of East Africa ranging from 13 to 18 percent. In the recent years, EA governments have turned their domestic revenue collection efforts on the mobile money transactions.

Mobile money is an electronic wallet service that allows users to store, send and receive money using their mobile phone. Mobile money was introduced in East Africa between 2007 and 2009 and many mobile money agents have sprung up in all parts of the region acting as conduits for deposits and cash transfers. These agents facilitate payment of bills, salaries and school fees, purchase of goods and transfer of money to family and friends.

Individuals who use mobile money services are faced with three layers of taxation: general taxation such as Value Added Tax (VAT), mobile sector specific taxation such as excise duties on airtime usage and direct mobile money tax on transfer fees charged by telecommunication companies.

This makes the mobile industry on of the highest taxed in sub-Saharan Africa (Muthiora & Raithatha, 2017). In Uganda, mobile money users have recently had to contend with a 1% tax levied by government starting in July 2018.

Uganda already taxes fees charged from mobile money transactions by both agents and mobile money providers at 10%. Similarly, in Kenya, mobile money users have started paying higher transaction fees following the increase in mobile money excise tax from 10% to 12%. Likewise, in Tanzania, there is a 10% excise duty for sending and withdrawing money through mobile money transfer.

Mobilie money booth.png

Likely impact on consumers

The common denominator for regional mobile money taxation, regardless of the percentage, is its regressive nature i.e. disproportionately affecting low-income earner. Since the mobile money excise is charged on transfer fees, the tax is a larger share of the cost for smaller transfers. It imposes a larger burden on poorer consumers.

Mobile money services are also used as a source of saving and as such mobile money taxation is a major threat to financial inclusion across East Africa. Financial inclusion efforts seek to ensure that all households and businesses, regardless of income level, have access to and can effectively use the appropriate financial services they need to improve their lives.

Mobile money accounts are a means through which those who do not have accounts at formal institutions make day to day transactions, safeguard savings and pay for recurring expenses such as school fees. The increased cost of transferring money as a result of taxation is bound to force many to scale down the use of the services and this will affect the overall integration of households into the financial artictechture.

Likely impact on small and medium enterprises

Mobile money taxation undermines investment at a time when mobile operators are already under significant cost pressure to expand networks, improve service quality and address new regulatory requirements. Besides, the platform provides employment to many people who now have to contend with earning less commissions and overseeing less transactions. This is because mobile money use has dropped since the introduction of these new tax measures according to recent media reports (URN, 2018).

SMEs stand to lose a lot of their low-income, rural-based clientele. Mobile money is an integral means through which citizens access utilities such as water and electricity. The imposition of taxes on mobile money implies that the cost of these utilities has swiftly risen. Where physical payments may be impractical or impossible (particularly in the rural settings), there stands to be significant drop-outs in the use of these services, to the detriment of both consumers and service providers.

Likely impact on governments

The mobile money tax betrays the social contract between citizens and government. It is universally agreed that citizens pay taxes to their government and in return, the government provides quality services to the people. However, the tax assessed on citizens has to be fair, adequate and transparent. The introduction of this tax was hurriedly passed by parliament without adequate consultation of stakeholders which is necessary to effect stakeholder buy in and ultimately consensus.

The crux of the matter is that mobile money taxation does little to support the fiscal objectives of governments. In a 2017 analysis in Tanzania, it was discovered that operator fees collected as mobile money taxes amounted to USD 8.7 million in the third quarter of 2016. This represented 0.09% of the Tanzania government’s total expenditure of USD 9.23 billion for that quarter.

Conversely, governments stand to gain a lot in public finances through working with providers to digitize payments of fees, rates, taxes and levies due from taxpayers. The Kenya National Transportation Safety Authority saw an increase in monthly revenue from USD 1.1 million in July 2015 to USD 2 million in October 2016 by digitizing payments due to it from motorists (Muthiora & Raithatha, 2017).

In conclusion, there is an urgent need to bring on board all key stakeholders in the decision making and policy design process of mobile money taxation. This includes telecom companies, governments, small and medium enterprises and consumers. This will ensure that stakeholder concerns are accommodated in the taxation regime as governments seek to increase domestic revenue.


Muthiora, B. and Raithatha, R. (2017). Rethinking Mobile Money Taxation. 20 October 2017. [Online] available at (Accessed: 10, July 2017)

URN. (2017). Mobile money agents launch scheme to beat new tax. 4 July 2018. [Online] available at (Accessed: 11, July 2017)


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