Uganda’s next tax revolution may already be happening in the pockets of millions of citizens. Every time someone sends mobile money, buys airtime, pays for data, makes a digital payment or receives money through a mobile wallet, they leave behind a record of economic activity. Individually, these transactions may appear insignificant. Taken together, they are creating something Uganda’s tax system has historically struggled to obtain, a clearer view of how the economy actually moves.
That matters because the biggest challenge facing Uganda’s tax system may not simply be the absence of taxes. It is the gap between the economic activity taking place and the portion of that activity that the state can see, measure and ultimately tax.
The Uganda Revenue Authority (URA) is increasingly trying to close that gap with technology. Its Telecom Monitoring System (TIMS) and Data Monitoring System (DMS), alongside tools such as the Electronic Fiscal Receipting and Invoicing Solution (EFRIS) and Digital Tax Stamps, point to a broader transformation in tax administration. Instead of relying entirely on what taxpayers declare, government is building systems that can generate and compare information about economic activity independently.
This is why the story is bigger than URA’s technology. The scale of the digital economy explains why that visibility is becoming increasingly important. By December 2025, Uganda had 47.1 million active mobile subscriptions, 36.3 million active mobile-money accounts and 18.5 million internet subscriptions, according to the Uganda Communications Commission.
As billions of digital transactions move through Uganda’s economy, the tax authority is gaining an unprecedented view of economic activity. The opportunity is to turn that visibility into revenue without making the digital economy more expensive or intrusive.
Mobile money has become particularly important to this transformation because it is no longer simply a way to send money between individuals. It has become part of the country’s everyday economic infrastructure. Traders receive payments through it, customers pay businesses through it, households use it to settle bills and increasingly more commerce takes place without physical cash.
Mobile-money transaction volumes rose from 2.8 billion in 2019 to 5.4 billion in 2023, while the value of those transactions increased from Shs73.1 trillion to Shs189 trillion.
That expansion creates a growing digital footprint of the economy. It also helps explain why taxes collected from telecom services, mobile money and value-added services have become increasingly significant, rising from Shs836 billion in the 2019/20 financial year to about Shs1.49 trillion in 2024/25.
The opportunity for government, however, goes beyond collecting taxes from telecom services themselves.
The more economic activity moves through digital systems, the more information becomes available to establish patterns of activity, identify inconsistencies and improve tax compliance.
That represents a fundamental shift in how the state can approach taxation. Traditionally, tax administration has depended heavily on declarations. A business reports its sales, income and tax obligations, and the authority audits those declarations where necessary. Digital systems introduce another layer: independent information against which those declarations can be tested.
URA says its telecom monitoring systems monitor billions of transactions each month across voice, SMS, internet data, mobile money and other digital services. The systems are also intended to help the authority identify discrepancies and improve revenue forecasting.
In practical terms, Uganda is moving towards a tax system that does not only ask, “What did you declare?” but increasingly has the capacity to ask, “Does the economic activity we can observe support what you declared?”
That distinction could become particularly important in Uganda’s informal economy. A large number of businesses operate outside the conventional structures of formal tax administration. A small trader may not maintain sophisticated accounts. A service provider may not have a formal point-of-sale system. A business may conduct much of its activity through cash and remain difficult for the tax authority to observe.
Digitalisation changes part of that equation. A trader who once operated almost entirely in cash may now receive payments through mobile money. A business that previously issued handwritten receipts may increasingly generate electronic invoices. A customer who previously paid anonymously in cash may now leave a digital transaction record.
But this is where Uganda will need to exercise caution. A digital transaction is not automatically taxable income. Money can be transferred between family members, borrowed, refunded or moved for purposes that have nothing to do with taxable business activity. Digital visibility should therefore not become an excuse to treat every transaction as evidence of tax evasion.
The value of the data lies in the patterns it reveals. When combined with other information, those patterns can help government determine where genuine taxable economic activity exists and whether businesses are complying with obligations that already apply to them.
That is where systems such as EFRIS become part of a much bigger picture. If mobile money can provide information about payments and telecommunications systems can reveal patterns of digital activity, electronic invoicing can provide another layer of information about sales. Banking and fintech systems can add further pieces to the picture.
Individually, these systems may tell only part of the story. Connected together, they could give government an increasingly detailed picture of who is selling, who is buying, how much is changing hands and where economic activity is taking place.
For Uganda, that could create a new route to fiscal space. Government collected about Shs29.87 trillion in tax revenue in the 2024/25 financial year, while the tax-to-GDP ratio increased from 12.7 percent to 13.1 percent. Yet the state continues to face large financing demands for infrastructure, healthcare, education and other public services.
The conventional response is familiar: introduce new taxes, increase existing ones or borrow more. Digital tax administration offers another possibility.
If technology can reduce under-reporting, identify leakages, improve compliance and make revenue forecasts more accurate, government can potentially increase domestic revenue without relying entirely on higher tax rates.
That is what expanding fiscal space through technology should mean. It is not simply about extracting more money from the same taxpayers. It is about improving the state’s ability to capture a fairer share of economic activity that is already taking place.
But the strategy carries its own risks. The more Uganda’s economy becomes digital, the more information is generated about citizens and businesses. That raises legitimate questions about privacy, data protection, cybersecurity and how information collected for tax purposes is governed and used.
There is also a basic economic tension: the digital economy must remain affordable if it is going to keep expanding.
Uganda already taxes telecommunications and digital services in several ways. If the cumulative cost of taxation makes internet access, mobile money or digital payments significantly more expensive, it could discourage the very behaviour that is making the economy more visible in the first place.
The state therefore has to avoid creating a paradox in which it taxes the digital economy so heavily that it slows its growth, reducing the economic activity from which future revenue will come.
The same principle applies to compliance. Digital systems can make tax administration more efficient, but they can also make compliance more burdensome if businesses are required to navigate increasingly complex systems without adequate infrastructure, support or clarity.
The objective should therefore not be to create the most powerful surveillance system possible. It should be to create the most intelligent tax system possible.
That means using data to identify genuine risks rather than assuming that every digital transaction represents taxable income. It means improving compliance without pushing small businesses further into cash. It means strengthening revenue collection while keeping connectivity and digital payments affordable. And it means building strong rules around how economic data is collected, protected and used.
If Uganda gets that balance right, the implications extend far beyond URA. The country could develop a tax administration that sees economic activity more clearly, forecasts revenue more accurately and responds to changes in the economy faster than a system dependent primarily on periodic declarations and physical audits.
That would be a significant change in the relationship between the state and the economy.
For decades, much of Uganda’s economic activity has existed beyond the full visibility of formal institutions. Digitalisation is beginning to change that. The informal economy is not suddenly becoming formal simply because people use mobile money, but economic activity that was once almost invisible can increasingly leave behind evidence that government can analyse.
The question now is what the state does with that visibility. If it uses the data primarily to create more taxes and increase the cost of doing business, digitalisation could become another burden on households and enterprises.
If it uses the data to improve compliance, reduce leakages, widen the effective tax base and collect more fairly, it could become one of the country’s most important tools for fiscal reform.
That is why Uganda’s digital tax transformation deserves to be understood as something much bigger than a technology project at URA.
The country is building the infrastructure to see its economy differently. And once a state can see more of its economy, it can potentially tax more intelligently, forecast better, plan better and reduce its dependence on borrowing.
The real test is whether Uganda can turn that visibility into fiscal space without turning the digital economy into a more expensive, intrusive place to operate. Uganda is not just digitising tax collection. It is beginning to digitise the state’s view of the economy.
