New Taxes Likely to Hurt Economy

With the new proposed taxes scheduled to take shape next week, Dr.Fred Muhumuza an economist, says that some new taxes such as social media tax will be hard to implement saying that social media is a business platform.

In an interview with the Morning Breeze on NBS, Dr. Muhumuza said that the right que is to strengthen the tax base however some of these taxes may kill off some investments and as such there needs to be a  balance  at the speed at which the economy is growing and the tax base.

The social media tax which was approved by Parliament in May means that each person using platforms like WhatsApp, Facebook, Viber and Skype among others, will be subjected to a daily levy of Shs 200 while each mobile money transaction will be subjected to a 1 per cent excise duty. The government is projecting to collect Shs 284 billion from the measures.

Dr. Muhumuza said “We will need to wait for the first quarter to see if the minister will realize the intended revenue. By putting 200shs on someone who spends 500shs, some people may fall off.”

While appearing before the Parliamentary committee on Finance in May before the tax proposals were approved, Francis Kamulegeya, Director of Accounting and Audit at PriceWaterhouse Coopers (PwC) told the committee that the tax proposals were only aimed at exploiting the public.

Dr. Muhumuza said that the mobile money tax is the payment system that is being taxed now.

Data from Uganda Communications Commission shows that there are about 21 million mobile money subscribers in Uganda. Mobile money has been used by a number of institutions that are involved in financial inclusion.

On the general state of the economy Dr.Muhumuza said that the inflation is low and the demand is not enough to drive the economy.

Dr. Muhumuza also said that the focus needs to  shift from power production to power transmission and how best power  can be distributed in the places that don’t yet have it.