Officials from Bank of Uganda have told Parliament that the 0.5% tax levied on Mobile Money withdraws is likely to affect the gains already made in regard to financial inclusion.
The officials who were appearing before the Parliamentary Committee on Finance, chaired by MP Henry Musasizi said that excise duty tax on mobile money is neither fair nor equitable and will deter the growth of the country’s financial institutions.
The committee is currently picking the views of different stakeholders and actors on the Excise Duty Amendment Bill No 2 of 2018 which proposes a 0.5% on withdraws made through Mobile Money.
In May, Parliament passed the initial amendments in the Excise Duty law intodrucing taxes on depositing, sending and withdraw of money via mobile phones, sparking outrage among the public. In the weeks that followed, the business community and politicians especially in the opposition protested the taxes which they said were burdening Ugandans.
According to Bank of Uganda, mobile money transactions declined by Shs 672 billion in the first two weeks of implementing the new taxes.
Mobile money has been praised for bridging the financial inclusion gap that had been occasioned by the negligible numbers of Ugandans with bank accounts. Today, almost every Ugandan using a mobile phone can send, receive, and save money through Mobile money.
Relatedly, telecom giant, MTN Uganda has similarly told Parliament that the tax on Mobile Money has negatively affected the volume of transactions as well as revenue generated therefrom.
MTN Uganda’s CEO, Wim Vanhelleputte told the committee of Parliament that the telecom has seen a 30% drop in revenue since the implementation of the Mobile Money Tax.
He said that service providers are already being taxed VAT and Withholding tax on these services and thus the additional 0.5% tax is unnecessary.