Telecommunication companies; MTN Uganda and Airtel have asked government to revise the 0.5 percent tax on Mobile Money service claiming that the move has completely hampered business.
Officials from the two companies made the request while appearing before a finance committee tasked with scrutinising the Excise Duty amendment Bill at parliament.
Speaking to the committee, MTN Uganda’s CEO Win Vanhelleputte said that by taxing Mobile Money, government has hampered businesses of over 5000 SACCOs which are supported by the service.
Vanhelleputte claims that the business has not yet grown to the maximum potential it is expected, hence taxing it is not right. He gave an example of Mpesa in Kenya which now is used as a means of payment on most services including bills in bars.
“We are still a young industry, if you tax a young industry you might end up killing it. W need to find the right balance between tax and growing the potential of this industry. Like in Kenya, Mpesa is a whole system of making payments, we need to have the same system here where people can pay for any service with their mobile but we are not there yet,” Vanhelleputte said.
Meanwhile, Denis Kakonge, the Airtel Legal Regulatory Director, said taxing mobile money undoes the positive contribution it comes with. He revealed that ever since government introduced the tax in July, transactions have dropped by a whooping 33 per cent.
Kakonge also hinted that taxing the service has discouraged people from digitising money but rather choose to keep it as cash which posses more risks to them and the legal tender.
“We think that the taxation of the mobile money service which is still in its infant stage so if you tax it, you reduce the uptake of the service and undo the positive contribution that mobile money has created which includes; employment and easy access of finances, financial inclusion, proximity and increased revenue due to employment,” Kakonge remarked.
A survey indicates that since the introduction of mobile money, 47 percent of people in Uganda have abandoned the service. The same survey indicates that 44% are transacting less money while 2% are transacting about the same as before and only 4% are transacting more since July.
36% of the Mobile Money agents respondents said they had stopped transacting money, suggesting a significant impact on closure of these businesses.
The over 2,334 respondents said the impact of the new Mobile money tax can be felt in their businesses pointing out delayed payments, general inconvenience, increased cost of doing business and reverting to bank and cash payments among others.
Meanwhile while appearing before the same parliament committee, officials from Bank of Uganda revealed that the country has lost Shs627b ever since the mobile money tax was implemented.
The officials recommended that Parliament should withdraw the whole tax on mobile money arguing the proposed bill is not neutral, fair, equitable and has additional dangers regarding the growth and financial inclusion.
Should parliament heed to the scrapping of this tax, it will be the second third time it has been revised. Minister of Finance Matia Kasaijja, has prior told media that the initial mobile money tax proposal was at 0.5% but members of parliament used his absence during plenary to revise the figure upwards.
Once passed, President Museveni also recalled the figure asking that rate be 0.5% instead of the 1% earlier communicated, the president then directed all telecom companies to refund the difference to those that had been affected. However, the refunds are yet to be received.