8 September 2018

Uganda: Mobile Money Tax Shores Up URA Collection and It Could Be Here to Stay

More than 45 days after the government of Uganda gave in to public pressure and introduced a Bill in parliament to remove the one per cent excise duty on receiving and sending mobile money while reducing the tax rate on withdrawing to 0.5 per cent, not much has come out of it.

According to parliament procedure, a Bill is supposed to take 45 days in the committee stage, then taken to the House for passing.

However, with the Bill on excise duty, the chairman of the Finance Committee Henry Musasizi says they are taking time to consult because of various divergent views.

Among these views is one that the tax should stay. One of its supporters is Keith Muhakanizi, the secretary to the Treasury and permanent secretary in the ministry of Finance, Planning and Economic Development, who is pleased with the impact of the tax measures that was introduced in the 2018/19 financial year budget.

"The increase in taxes is working. We are absolutely okay with what we did," he said.

After missing its tax collection targets by Ush606.32 billion ($160.2 million) for the financial year 2017/18, Mr Muhakanizi says the Ugandan Revenue Authority is now back to doing well.

For the month of July, URA collected Ush1.4 trillion ($366.4 million). This represents a net collections surplus of Ush35.8 billion ($9.5 million).

Increased collection

While URA data shows that international trade surpluses and non-tax revenue were the biggest contributors to the good performance, the presence of mobile money and social media taxes played a role in increased collections.

Without the taxes on mobile money and social media, URA's surplus would have been about Ush9.5 billion ($2.5 million).

Henry Saka, the head of Domestic taxes at URA says that the one per cent mobile money tax contributed Ush22 billion ($5.8 million), while the Ush200 ($0.05) daily excise duty on social media use contributed Ush4.3 billion ($1.1 million).

While these are below the targets of Ush9.6 billion ($2.5 million) for the 1 per cent tax on mobile money and the Ush23 billion ($6.1) for the daily excise duty on social media use, Mr Muhakanizi says he is happy with what they have so far achieved.

The Bank of Uganda and telecommunication companies have, however, said the tax on mobile money affects financial inclusivity and should be scrapped.

Mr Musasizi however is of the opinion that consultations on the same should be allowed to take their course.

Someone using mobile money for the first time since the new tax was announced, is not charged any tax on receiving and sending. An individual withdrawing for the first time, since the new taxes came into force will pay 0.5 per cent of their transaction value as excise duty.

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