The Central Bank has raised alarm over the implications of the new Mobile Money tax stating that government lost Shs627b in just two weeks after customers shunned the service following the taxes.
Appearing before the parliamentary committee on finance, officials from Bank of Uganda Director said that even the proposed 0.5% tax only on withdrawals will retard financial inclusion.
The officials led by the Bank’s Statistics Director, Charles Abuka said the mobile money tax violates many principles including; neutrality, fairness, equitability and has additional dangers regarding the growth of the financial inclusion. Abuka told the committee that mobile money tax transactions declined significantly due to evasion.
“Indeed the value of mobile money transactions declined by 672b in the first weeks on July 2018, as compared to the first weeks of June the same year,” Abuka said.
Abuka said the tax is neither neutral or equitable between like forms of business activities since it does not apply to withdraws from banks, SACCOs of microfinance institutions.
The committee also interfaced with officials from telecommunication companies who affirmed that the Mobile Money tax had indeed hampered business, leading to an over 33 percent decline in transactions.
These called for the complete withdraw of the tax claiming it was hurting the young industry by limiting financial inclusion, proximity, easy access to cash and revenue through causing unemployment.
They said government already charged 15% excise duty and 10% withholding tax on the same services hence no need for the 0.5% tax.
This contradicts report by government through State Minister for finance and Planning, David Bahati who claimed that government had already made Shs5b in two weeks of Mobile Money tax inception.
“We had estimated 2.5m but for the first week we made Shs5b, so we are far ahead of target,” Bahati said two weeks ago.
Bank of Uganda states that there are 20million mobile money users in the country but Telecom companies claim the active number is only half that stated by central bank.
President Museveni had earlier lashed out at telecom companies for under-declaring revenue obtained from services.
Aruu County MP, Odonga Otto said telecom companies are reaping a lot of money from Ugandans and “I would pray that if we are sending our proposals to parliament, the costs must come down, transferring Shs1m should cost a Ugandan Shs7000 with all costs and taxes involved.”