BoU, Telecoms Advice PAC To Scrap Off The Mobile Money And Social Media Taxes.
Appearing before the Committee On Finance, Planning And Economic Development, officials representing telecom companies MTN and Airtel Uganda said that mobile money tax has had a negative effect on their business and thus economy. The committee is scrutinizing the excise duty amendment bill which came into effect on July 1, 2018. The Ugandan government introduced a 1% tax on all mobile money transactions, and a UGX 200 levy on social media usage. However, due to public complaints the government tabled consultations to the bill reduced the charges, which made rates on mobile money reduce to 0.5% charged only on cash withdrawals.
According to MTN Uganda, there has been a drop in the use of mobile money in the period following the introduction of the tax. MTN Uganda’s CEO Wim Vanhelleputte, stated that mobile money supports 5000 savings and credit cooperative societies in addition to millions of small business owners, taxing the business is a big risk. To him, the government needs to find a balance between taxes in order to realize the full potential of the still young industry that is mobile money.
According to Denis Kakonge, the Airtel Uganda Legal and Regulatory Director, the volume of transactions on their network reduced by 33%. He says the tax forces the people to keep their money in cash which poses other risks. He adds that taxing the industry will reduce the uptake of the service, and undo the benefits such as creating employment. Earlier on in the first week of July, mobile money agents demonstrated in opposition to this tax.
Bank of Uganda also called the new taxes discriminating and unfair, saying that it poses a threat to growing financial inclusion. Director of Statistics at the Central Bank Charles Abuka, said that although taxing mobile money would increase revenue, it is inefficient, uncertain and complex. Abuka stated that the tax is discriminating in that it isn’t applicable on withdrawals from banks and micro finance institutions. Equity suggests that people in similar circumstances should bear a similar tax burden. A student who receives money for school fees shouldn’t be taxed the same as a business man. Henry Musasizi, the chairperson of the committee says that although the proposal is deemed unfair by Bank of Uganda, UGX 115 Billion is still needed to support the budget.
This tax (Mobile Money Tax) is not neutral, prohibits financial inclusion, and has caused more damage to economic growth” – Added Charles Obuka The Director Of Statistic – BoU
Economists from Uganda Bureau Of Statistics and Bank Of Uganda officials, blame 3.1 raise in inflation on the Mobile Money and Social Media Taxes. Uganda lost over UGX 672 Billion.
PAC member, Hon. Odong Otto advised that the committee puts up recommendations to cap the amount telecoms charge Ugandans on money transfers. The aggravated member of parliament laments that these telecoms cheat Ugandans with exorbitant rates, which they repatriate to their home countries.
Transferring UGX 1,000,000 should be charged UGX 7,000 inclusive of all relevant government taxes” – Hon Odong Otto