Kampala, Uganda | THE INDEPENDENT | The proposed introduction of new taxes on mobile money transactions and social media has met stiff rejection from civil society activists.
Government has proposed to introduce a 10 percent final withholding tax on commissions by telecommunication companies to mobile money and airtime agents and Shillings 200 daily levy on social media users like WhatsApp, Facebook and others in the 2018/2019 financial year.
While presenting the proposals before the Finance Committee, the State Minister for Planning, David Bahati, said the proposed taxes are envisaged to fetch government Shillings 11.3 billion and 284 billion respectively.
However, a number of Civil Society Organizations including Tax Justice Alliance Uganda, Consumer Education Trust and Civil Society Budget Advocacy Group (CSBAG) among others have rejected the proposal, saying the proposed taxes are regressive to the ordinary Ugandans.
The representatives of the CSOs presented their views to the Finance Committee Chaired by the Rubanda East MP, Henry Musasizi on the proposed taxes on Tuesday.
“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. Businge asked the committee to reject the proposed mobile money tax.
She 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.
They also noted that the proposed tax will perpetuate inequality especially for low income earners who will fill the pinch more. “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.
She said that the proposed tax on social media should be stayed and deferred until the time when Uganda Revenue Authority will acquire technology and technical capacity to administer such a tax. Businge also noted that when time comes for the tax to be imposed, it should be progressive in nature and take into account the income differences of Ugandans.
The views from the Consumer Education Trust were not any different from those of Tax Justice Alliance. Henry Richard Kimera, a representative from Consumer Education Trust told the MPs that the proposed tax on mobile money transactions will in real effect 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. This negatively affects savings,” said Kimera.
He further noted that the proposed mobile money tax will kill the economy through job losses in the Mobile money operations. He said that this will directly impact over 150,000 Agents especially youth and women through reduction in transaction volumes and ultimately commissions.