Parliament is now expected to reconsider the decision on whether the tax imposed on mobile money transactions is reduced or entirely scrapped this week.
This follows the failure to take The Excise Duty (Amendment) Bill, 2018 passed in May imposed a 1 per cent tax on all mobile money transactions including deposits, transfers and withdraws. However, following protests from MPs and the public, government presented a new Bill, the Excise Duty (Amendment) (No.2) to reduce the tax to 0.5 per cent applicable to withdraws only.
The State Minster for Finance, Hon. David Bahati, said the tax collection sought to raise Shs 115 billion and would help check on the country’s debt burden and finance the expenditure priorities appropriated by Parliament.
He noted that Uganda’s tax effort stood at 14.2 per cent of the GDP yet expenditures on development priorities passed by Parliament stood at 22 per cent of GDP, resulting in domestic and external borrowing from which high interests accrued.
“Increased borrowing means an increased debt burden, so we need to increase our tax revenue mobilization to promote self-reliance in financing our programmes at a reduced cost of borrowing,” Bahati said.
The Committee on Finance observed that implementation of the 1 per cent tax on mobile money transactions was met with challenges like misinterpretation of the excise duty law, which resulted in the taxation of deposits.
“Government has worked with Uganda Revenue Authority to inform the public and telecom companies not to collect the tax on deposits and use of mobile money for payment of taxes,” said Hon. Henry Musasizi (NRM, Rubanda East), the Chairperson of the Committee on Finance.
He recommended the enactment of consumer protection laws to protect citizens from high costs charged by multinationals, adding that Uganda Communications Commission ought to analyse components and formula used to determine the transaction charges with the aim of reducing them.
In a Minority Report however, a section of MPs, recommended that instead of the reduction from 1 percent to 0.5 per cent, the tax should be scrapped in its entirety.
Hon. Semakula Luttamaguzi (DP, Nakaseke South) highlighted proposals by various stakeholders including from the Finance Ministry, the banking sector, civil society organizations and mobile money dealers among others.
Most of these, according to the Minority Report, cited that the proposed tax was double taxation given that Government was already charging excise duty of 15 per cent on transaction fees and l0 per cent withholding tax on agent commissions.
“Tax Justice Alliance submitted that the proposed tax on mobile money will cause financial exclusion as most of the people will opt out of the payment. They proposed that the tax be dropped,” said Luttamaguzi.
Although the members approved the Bill for its Second Reading, the House failed to amend and approve clauses in the Bill in the Committee of the Whole House over lack of quorum. Even a 15-minute suspension of proceedings by the Deputy Speaker, Jacob Oulanyah, failed to raise numbers from 97 to the required 154.