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Bank of Uganda says Mobile Money transactions declined by Shs600bn after the implementationof  new tax. Courtesy Photo
Bank of Uganda says Mobile Money transactions declined by Shs600bn after the implementation of new tax. Courtesy Photo

Mobile Money Transactions Drop by Shs600bn After New Tax - BoU

Bank of Uganda said that the volume of mobile money transactions declined by Shs672bn within the first two weeks of July since the coming into effect of the 1% tax on mobile money.
posted onAugust 1, 2018
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By Max Patrick Ocaido

PARLIAMENT. Bank of Uganda (BoU) has revealed that the volume of mobile money transactions declined by Shs672bn within the first two weeks of July since the coming into effect of the 1% tax on mobile money.

"The value of mobile money transactions declined by Shs672bn in the first two weeks of July 2018 compared to the first two weeks of June 2018 in part following the announcement of the Excise Duty (Amendment) Act 2018 introducing a tax of 1% of the value of the transaction that would apply on mobile money transactions," Charles Abuka, Director of Statistics Bank of Uganda said.

While appearing before the parliamentary committee on Finance, Economic Planning and Development headed by Henry Musasizi, BoU officials led by Charles Abuka, said that government should look for a better way to raise revenue because the new mobile money tax will deter growth of the country's financial institutions.

"The tax (mobile money tax) is neither neutral nor equitable between like forms of business activities. The same tax doesn't apply to withdrawals from banks or microfinance institutions or SACCOs. In this sense, neutrality also entails that the tax system raises revenue while minimizing discrimination in favour of, or against any particular economic choice. This implies that the same principles of taxation should apply to all forms of business, while addressing specific features that may otherwise undermine an equal and neutral application of those principles," Abuka said.

The Excise Duty (Amendment) (No.2) Act, 2018 was recently returned to Parliament for reconsideration after public uproar over the 1% levy of all transactions on mobile money. The new Bill that is currently before a parliamentary committee now seeks to amend the Excise Duty Act, 2014 to limit the taxable mobile money transactions to withdrawal and to reduce the duty payable to 0.5% from 1% of the value of the transaction.

BoU also noted that this new tax is so unpopular and that whereas it was brought to raise revenue, it has instead led to reduction in transactions thus further loss of revenue that could have been collected through VAT or other forms of taxation.

Bank of Uganda officials said that even though the proposed bill reduces the tax to 0.5% and limits it to withdrawals, it is still not neutral, fair, equitable and has the additional dangers of retarding growth of financial inclusion.

"Maintaining and accelerating growth requires the right policies. Uganda's impressive growth over the last 2 decades has been driven by the decisions of the past. Future growth will be driven by the decisions we make today," he said.

He added, "Deepening inclusion by broadening the use of more advanced financial products and services could help Uganda move towards a more formalized, transparent and dynamic economy. Unfortunately, the tax on mobile money transactions seems to reverse the financial inclusion progress."

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