Uganda's politicians have voted down a proposal to scrap a sales tax on mobile phones following concerns from the government that it needs the revenues the taxes generate.
"I request Parliament to reject the proposal to scrap taxes on mobile phone because it will affect our revenue," Finance Minister, Ms Syda Bbumba said.
The opposition politicians who proposed scrapping the taxes had argued that expanding mobile phone usage into rural areas would be affected by the tax.
Mr. Oduman MP said, "The issue of losing revenue doesn't arise because the government will be charging more taxes on airtime used by mobile phone users, hence widening the tax base."
Phone dealers have long argued for the tax to be scrapped, citing increased levels of grey imports and smuggling from the neighbouring countries. The concerns were heightened with neighbouring Kenya lowered its taxes on mobile phone handsets earlier this year.
The GSM Association has long called for a lowering of taxes on mobile phone handsets and airtime, arguing that the lower costs boosts the user base and hence leads to a net increase in revenue for governments.
A recent report from the GSMA said that mobile subscribers across East Africa are taxed at some of the highest levels world-wide. Kenya, Uganda and Tanzania impose mobile-specific taxes which when added to VAT can result in their respective consumers facing taxes as high as 30% in Uganda and Tanzania, and 27% in Kenya, considerably the highest rates in Africa (and among the highest across the world as a whole).