Business

Proposed Mobile Money Tax Threat to Sector Growth, Government Told

Civil Society Budget Advocacy group (CSBAG)  and the Tax Justice Alliance Uganda have showed their discontent with the new proposed Excise Duty Amendment Bill which will see every mobile money user deducted 1% per transaction made.

Earlier this month, the state minister for planning David Bahati revealed that Ugandans will pay tax on all mobile money transactions.

According to this proposal (excise duty), a tax of 1 per cent of the value of the transaction will apply on mobile money transactions on receiving money, making payments and withdrawals of money, and this is set to be in effect starting in July this year, if it’s passed into a law.

The above, civil societies believe, will hinder growth of the sector.

CSBAG believe that the tax will reduce the uptake of mobile money services and adversely affect their businesses, which will have a negative knock-on effect across the economy.

Executive Director for CSBAG, Julius Mukunda, speaking to the press on Monday at the head offices in Ntinda, explained:

“This tax will increase the cost of sending and receiving money which will negatively affect value chains in agriculture, access to energy, utilities and trade services, and Uganda could suffer reversal of gains made towards financial inclusion.”

He added that taxing mobile money is in real effect going to reduce the amount of money available to cater for basic needs like health and Education.

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Henry Kimera, a consumer advocate, noted: “The 1% charge on every transaction value will also impede Uganda’s financial inclusion strategy (FIS) implemented by Ministry of Finance. Mobile Money has grown from zero mobile money accounts in 2009 to 22.8m accounts to date (2018).”

It was also revealed that about 150,000 mobile money agents (workers) are at stake of losing their jobs if the proposal is passed.

As a solution, Mukunda advised the government to increase excise duty on withdraw fees:

“At least excise duty on withdraw fees should be increased from 10% to 17.5%. This will generate about Ugs122bn which is Ugs33bn below the expected revenue from 1% transaction tax and the 15% proposed excise duty.

“It would however contribute to averting numerous dangers and economic losses that are bound to arise because of going ahead with the current proposal.”

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