Ask any top official at Uganda Revenue Authority about their feelings regarding mobile money and chances are that you will find some who will describe the money transfer service as a necessary evil.
While mobile money has eased the way transactions are carried out, and is contributing to turning Uganda into a cashless economy, it has, on the other hand, also denied the country tax revenue.
URA is getting a deeper sense of what it means when consumers ditch banking halls for roadside kiosks and the comfort of their living rooms to transact over the phone. The result: less tax revenue.
While announcing this financial year's quarterly tax revenue - where the tax body recorded a Shs 26bn deficit against its target - Commissioner General Allen Kagina said the below-par performance was partly influenced by "the increased competition banks are facing from mobile money operations."
With the advent of mobile money, banks have been denied bank charges, further reducing their revenue. Also, banks used to charge customers to open up accounts. Some banks used to charge as much as Shs 20,000 to open up an account. With mobile money, there is no need to pay for an account. It is all free.
The reaction has been tremendous. With more Ugandans paying for utility bills like water, electricity and pay-television via mobile money, the amount of money transacted on this platform shot to Shs 12 trillion early this year, from Shs 3.75 trillion in 2011, according to figures from Bank of Uganda.
Banks fight back:
Not to lose ground, banks have put up a spirited fight. Most of them have increased the hours of operation, some like Dfcu stretching to 7pm. Others like Diamond Trust and Standard Chartered have branches open on Sundays.
Some banks have decided to incorporate mobile money services or partner with telecom companies. Centenary bank, for instance, has Cente mobile platform where customers can deposit money on their bank accounts without going to the banking hall.
They can also check their account balance, and mini statement. At least most banks have encouraged their customers to use mobile money banking as a way to save time and being more convenient. Banks like United Bank of Africa are now mobile money agents.
With this trend of events, URA is digging in. It has sought to tax mobile money agents' commission. In her budget speech, Maria Kiwanuka, the minister of Finance, said she would introduce a 10 per cent excise tax on fees charged on the transfer of money by mobile network operators.
Last month, Cyprian Chillanyang, URA's commissioner for Domestic Taxes, told The Observer that they had started the exercise of registering the agents for tax.
Mobile money agents earn a commission whenever they carry out a transaction. URA is targeting all agents handling transactions above Shs 1m per day, with telecom companies acting as withholding agents for the tax body.
Meanwhile, URA registered a shortfall of Shs 26.65bn in the first quarter of this fiscal year. The tax body collected Shs 1,826.69bn against a target of Shs 1,853.34n from July to October. But compared to the same period last year, revenue collections grew by 17.44 per cent.
Mohammed Ssempijja, a tax partner with Ernst and Young, said while URA realised growth in revenue, he was not surprised that the tax collector did not hit the target. He said critical areas where the URA would have collected money have been heavily affected, largely because of the weak spending power. Also tax heads that are known to contribute immensely to the treasury were in an expansion period.
"We have foregone an estimated Shs 16bn as a result of expansion in the real estate sector by UAP, the telecom sector by Airtel, and others like Nile breweries [which was finishing its Mbarara brewery] and Roofings Rolling Mills."
Meanwhile, pay as you earn (PAYE) registered a surplus as a result of the growth in payrolls of companies in mining and quarrying, wholesale and intermediate trade. URA set the revenue target for the second quarter at Shs 2.28 trillion.