For the second time since the law was effected at the beginning of this month, government has made changes in the tax levied on Mobile Money transactions.
In the latest changes, Cabinet has approved a proposal to scrap the 0.5% tax on sending money to other Mobile Money users and maintained the tax (0.5%) only on withdraws.
This was announced on Tuesday by the State Minister for Planning, David Bahati while briefing the press on the resolutions passed by Cabinet during its sitting at State House Entebbe on Monday.
Last week, Prime Minister, Dr Ruhakama Rugunda told Parliament that government was drafting a Bill to make reviews in the tax measures. It followed protests and an outburst among the members of the public challenging the taxes which many viewed as burdening.
Initially, the law (Excise Duty Amendment Bill 2018) that was passed by Parliament in May placed a 1% levy on Mobile Money transactions (deposits on personal accounts, sending and withdrawing). But days after the taxes tool effect, President Yoweri Museveni directed for the scrapping of the 1% on personal deposits which he said was erroneous. He also said the charge on the other transactions (sending and withdraw) was supposed to be 0.5% and not 1%.
Bahati said that the proposals approved by Cabinet yesterday were a step by government to honour the commitment by the Prime Minister. He said that the amended Bill will be presented for first reading this Thursday in Parliament.
Quoting statistics by the Central Bank, Minister Bahati said that 11 trillion transactions (for sending) are made on Mobile Money and 23 trillion transactions are made on withdraws.
“We do expect that if we charge the levy of 0.5% on withdraws only, we shall still raise Shs 118 billion which is slightly above what we had budgeted for (Shs 115 bn) in the budget,” Bahati told reporters at the Uganda Media Centre.
“So, we are still fine, because we had discounted and hoped that as implementation goes on, we could even over shoot it”.
He revealed that while governmet had estimated to collect slightly over Shs 2bn in the first week of implementation of the taxes on Mobile Money, a sum of Shs 5bn was raised in the same week, representing an excess of over Shs 2bn.
“So this measure of 0.5% on withdraws only will still raise Shs 118 bn. Imagine what Shs 118bn can do in terms of health services, education and infrastructure,” Bahari said.
Minister for ICT and National Guidance, Frank Tumwebaze said that the new changes by government are “exciting” as it will be instrumental in the agenda towards a cashless economy.
“Me, as a Minister of ICT, that’s very exciting. It means the Ministry of Finance is fighting payouts and cashouts. I can pay my bills using my phone without withdrawing money. The withdrawal is for you who craves carrying physical cash,” Tumwebaze said on Tuesday during the same news conference.
He said that in addition to widening the tax base, this measure will spur cashless transactions, which is the global trend, and support innovations in the finance sector.
Regarding the issue of refunding the Mobile Money users whose money was deducted due to the erroneous taxes, Bahati said the reimbursement for the tax on deposit will be easy and quick.
“The first [refund] is where at the start of implementation, we charged 1% on deposits and immediately corrected that. This is legitimate and it will be implemented quickly and easily because it wasn’t the intention of the law,” he said.
He added: “The other charge of 0.5% is a legal issue that we shall be consulting the Attorney General and then inform the country”.