After several squabbles and string pulling in Uganda’s Parliament, majority MPs finally voted to support the Excise Duty Amendment Bill No 2 which provides for 0.5 per cent tax on Mobile Money withdrawal transactions.
Only 288 legislators of the over 450 participated. 124 MPs voted against the imposition of the 0.5% tax on mobile money withdraws while 164 were in favour. Previously, Mobile Money transactions were being taxed at 1%.
Those who were against the bill argued that there is already excise duty charges of 15% on transaction fees and 10% withholding tax on Agent Commissions, reasoning that the 0.5% tax tantamount to double taxation.
“Once again, the majority of our elected representatives ignored the cries and pleas of the common person. I have made it clear to my colleagues that we must learn to side with the people or the people will despair. They cannot continue to further oppress the already oppressed citizens of this country,” said Kyaddondo East Member of Parliament Robert Kyagulanyi aka Bobi Wine on his Facebook page.
Background
During the passing of the 2018/19 financial year budget, the government introduced a 1 per cent tax on every mobile money transaction. This included depositing, withdraws, sending, receiving and paying for utilities.
Due to public pressure and outcry, the Ministry of Finance was directed by Parliament to redraft and table an amendment that pursued to change Mobile Money Tax to 0.5% from 1%. It was also streamlined that this tax would be levied only on withdraws.
On July 12, President Museveni issued a statement directing that the 1% tax incurred on Mobile Money transactions be refunded to those who paid it and that the tax is halved to 0.5% because the Bill was signed with an error.
“I signed the law with the error because we could not delay the other measures. However, Parliament, when it reconvenes, will be requested to correct it. The ones whose deductions had been made on the basis of 1 per cent should have their money reimbursed,” said Museveni in a statement.
Justifying the tax, Finance State Minister in Charge of Planning David Bahati and the ICT Minister, Frank Tumwebaze on July 17, addressed a press conference where they said that the government had earned UGX 5 billion from the tax collections in just two weeks.
After coming into effect on 1st July this year, the Ugandan public, mobile money agents and users protested the tax. They argued that the tax had adverse effects on the economy and was in line to kick them out of business.
Noting that there had been a drop in use of mobile money after that tax was introduced, Wim Vanhelleputte, the Chief Executive Officer of MTN Uganda said they are a young industry that can easily be killed off by the new tax.
Appearing before the Parliamentary Committee on Finance in early August, Bank of Uganda Director of Statistics, Charles Abuka, disclosed that the value of Mobile money transactions declined by Ush 672 Billion within the first two weeks of July.
However, last month, the Central Bank finally agreed with the Ministry of Finance on retaining and revising the mobile money tax to 0.5 per cent at withdrawal points.
Appearing before the same committee on September 11, State Minister for Finance in charge of Planning, David Bahati and Bank of Uganda Governor, Emmanuel Mutebile told legislators that they had had in-house meetings and reached a common position on the 0.5 per cent levy on mobile money withdrawals.
“Following the meeting, we (Ministry of Finance) had with the officials of the Bank of Uganda, the final position of the government is to maintain the proposed levy of 0.5% on mobile money withdrawal,” Bahati told the committee.
Harriet Kekirunga, a Mobile Money agent who operates from Naalya, a Kampala suburb, says, “First of all, the 1% currently being charged means if a person wants to withdraw UGX10,000, they are charged 100. And even if that reduced to UGX50, it is still a lot of money because there are already other transaction charges involved.”
“We are simply going to run out of business because people do not want to get their money deducted for no good reason. The number of people transacting on mobile money platforms is continuing to decline,” she added.
Over 150,000 Uganda Mobile Money Agents at risk of losing jobs.
Effect on the final user
Henry Ntale, a regular mobile money user revealed that the new tax may force him to consider other options of transacting money.
“On Sunday, I needed to withdraw UGX4 million but by the time I was through with the transaction, about UGX 90,000 had been deducted. Now tell me why I should not be going to the bank instead of using mobile money.”
He added: “We are working backwards; the convenience of mobile money had made it the platform of choice for someone who does not have time to line up in a banking hall. But right now, banking is cheaper than transacting with Mobile Money, so we are working backwards.”
The government levied Mobile Money tax judging on how the transactions were rowing, but with the user now bearing the brunt of the tax, it may not be long before they abandon using the platform. This will affect the tax collections negatively, meaning the target tax revenue may not be met.
