Scrap mobile money tax or prepare for service shutdown – dealers

Mobile Money dealers have asked government to scrap the mobile money tax or risk having the service collapse by the end of the year.

The dealers told MPs on Parliament’s Finance, Planning and Economic Development committee that even the proposed 0.5% levy on mobile money withdrawals will hurt the business.

Norman Batuuma, the team leader of the Mobile Money Dealers Associations in Kampala said the transactions have dropped by 30 per cent since the introduction of the tax in July.

Batuuma noted that such charges have forced 236 agents with less than a year in the business to close shop in Kampala and Wakiso.

“Experienced agents still hang on with hope of a positive change as they look for opportunities elsewhere,” said Batuuma.

The dealers appeared before the Committee to make their submissions on the Excise Duty (Amendment) Bill 2018 that introduced by government following a public outrage over the tax.

Government introduced a 15 percent of fees charged for the transfer or withdrawal services, including transfers and withdrawal services by operators licensed or permitted to provide communications or money transfers or withdrawals but not including transfers and withdrawal services provided by banks.

In addition, government also introduced a 1 percent of the value of a transaction on receiving, payments and withdrawals of mobile money transactions in the budget for the financial year 2018/2019.

The Excise Duty (Amendment) Bill 2018 seeks to reduce the tax to 0.5 percent and to only apply to withdrawal of mobile money transactions.

Batuuma noted that the tax has also pushed youths out of employment since the majority of the operators are young people.

“The drop in transactions will also affect government because it means that taxes collected will not meet the intended target,” Batuuma added.

MPs asked the dealers need to provide government with practical proposals to expand the tax base.

Hoima Municipality MP Lawrence Bategeka said, the committee should consider the recommendation by the Central Bank to scrap the tax.

“Let us look for other alternatives. We need to be considerate to the majority of Ugandans who are depending on mobile money,” said Bategeka

The Chairperson of the Committee, Henry Musasizi however, queried the dealers over their decision to increase transaction charges before the 0.5 percent tax was effected.

He said that for instance, charges on withdrawals within Shs1m were increased from Shs10,450 to Shs12,500 in June.

“We need you to go and explain to the clients why you increased these charges because they are not aware,” said Musasizi.