Government’s proposal to introduce new taxes on mobile money transactions and social media, has been rejected by civil society activists.
According to the proposals, a 10 percent final withholding tax on commissions by telecommunication companies to mobile money and airtime agents and a Shs 200 daily levy on social media users will be introduced in the 2018/2019 financial year.
However, a number of Civil Society Organizations including Tax Justice Alliance Uganda and Consumer Education Trust and Civil Society Budget Advocacy Group (CSBAG) among others, argue that the proposed taxes are regressive to the ordinary Ugandans.
They quashed the proposals while presenting their views to the finance committee chaired by the Rubanda East MP, Henry Musasizi on April 24.
“Mobile money is currently a tool used by a cross section of Ugandans. We observe that this tax is regressive, it does not consider the income differences in the population and will hinder financial inclusiveness,” said Nelly Businge from the Tax Justice Alliance.
Mr Businge advised the committee to differ the tax until a thorough and comprehensive plan to tax internet and online services is formulated.
Tax Justice Alliance also told the committee that the proposed tax on Social Media will make it more expensive for Ugandans to access online services and ultimately deter growth of e-commerce.
But the CSOs said that the proposed tax will perpetuate inequality especially for low income earners who will shoulder the ultimate burden.
“There is no information on how this proposed tax will be administered. Therefore it may be expensive and hard to administer due to the technological and technical capabilities required to administer such a tax,” Businge noted.
While presenting the proposals before the Finance Committee, the state minister for Planning, David Bahati, said the proposed taxes are envisaged to fetch government Shs11.3 billion and Shs284 billion respectively.
Henry Richard Kimera, a representative from Consumer Education Trust, told MPs that the proposed tax on mobile money transactions will reduce the amount of money available to cater for basic needs like education and health, which directly affects the rural-urban poor segments of the population.
“Whereas 59% of Ugandans have access to financial services (largely contributed to by Mobile Money accounts), there is a high risk that the tax will reverse this positive outlook. This speaks to the financial inclusion strategy of the Finance Ministry and negatively affects savings,” said Kimera.
He further noted that the proposed mobile money tax will kill the economy through job losses in mobile money operations.
“This will directly impact over 150,000 agents especially youth and women through reduction in transaction volumes and ultimately commissions,” he said.