Mobile Money Tax: Cabinet Directs for Exemption of 1% Levy on Personal Deposits

Cabinet has directed that a review is made in the recently implemented new tax measures, particularly in the Mobile Money transactions to exempt transactions of the 1% levy where one is depositing money on their personal mobile number.

This clarification was made by the State Minister for Planning, David Bahati on Tuesday while briefing journalists on the decisions made by Cabinet during its sitting at State House in Entebbe on Monday.

With effect from 1 July 2018, as according to the tax proposals contained in the Excise Duty Act of 2018, “A tax of 1 per cent of the value of the transaction will apply on mobile money transactions on receiving money, sending money, making payments and withdrawals of money”.

However, when the new tax measure took effect on Sunday, the 1% levy was also effected on individuals depositing money on their numbers using Mobile Money agents.

For example, if a Mobile Money user deposited Shs 100,000 on their mobile money account, Shs 1,000 was deducted as deposit tax, since the new measure took effect.

It is this error that has prompted Cabinet to call for an urgent administrative review, according to Minister Bahati. Subsequently, Uganda Revenue Authority (URA) has been instructed to correct this.

“We [Cabinet] did reflect on the Mobile Money levy. However, there is a clarification we would like to make, because we said we would levy 1% of mobile money transactions on withdraw, receiving and payment,” Minister Bahati said.

“But there was a misinterpretation that receiving also includes digitizing money in other words deposits. If I go to a mobile money agent and say ‘I have Shs 5 million, put it on my phone so I can make transactions’, that was seen as if I am receiving”.

He clarified; “Of course you can’t receive from yourself. So, the 1% does not apply on depositing on your own account”.

“That clarification was made in Cabinet and we hope that URA will implement it as soon as possible, and if that is done, we shall have to move the way we passed the tax measure”.

He however was quick to add that if government notices any cause of reviews, they will be made.

Ugandans have over the last few years quickly adopted to the transaction of business and other money transfers using their mobile money. Majority of these users have since expressed dissatisfaction towards the new tax levy on Mobile money transactions terming it as double taxation.

Many opined that the numerous deductions by telcos and government would pinch the ordinary users most of whom depend on distant relatives for livelihood.

A typical example was a case of someone seeking to send Shs 1 million to their grandmother to the village using MTN Mobile Money. As a result of the new taxes as well as other charges by the telco, this receiver (grandmother) would lose a total of Shs 57,461, and only receive Shs 948,539 in cash.

In defending the tax measures, Bahati said government is in a difficult position to mobilize more domestic revenue so as to be able to provide the much needed services and development. He also said that local revenue is needed to reduce Uganda’s reliance on foreign aid which pushes the country in debt burden.