The 0.5 per cent tax on Mobile Money is discriminative and is likely to affect financial inclusion, officials from Bank of Uganda have said.
The officials said this while appearing before the Parliamentary Committee on finance on Wednesday to give their views about mobile money tax.
The officials, who also appeared before the committee alongside their counterparts from telecom companies, said mobile money transactions declined by 672bn shillings in the first two weeks of implementing the mobile money tax.
Meanwhile, MTN said it has registered a 30 per cent decline in revenue since the implementation of the Mobile Money Tax, just a month ago.
MTN officials said, by implementing the Mobile Money Tax, the government put much burden on them and their customers, thus the drop in the revenue.
They argued that the recently implemented mobile money tax be dropped since they already pay 15% Excise Duty and 10% withholding tax on the same service.
In its pursuit to hit Shs16.2 trillion revenue target for the financial year 2018/2019, the government had introduced a 1 per cent tax on mobile money deposits, withdraws and payments, before it was reduced tom 0.5 per cent due to public outcry.
The Excise Duty Amendment Act 2018, which brought in place the mobile money tax was assented to by President Museveni and signed into law on June 21, 2018.
Financial experts say taxing the movement of money discourages trade and commerce, it discourages the formalisation of the economy and it interferes with financial intermediation.
“It undermines the progress and successes made in the country in respect of financial inclusion. It hurts the poorest most, and this is already evident on the basis of the impact the tax has had in just five days. It will result in massive loss of employment, both direct and indirect employment in the mobile money sector, it will discourage people from using mobile money services and it will increase the cost of doing business in Uganda,” said Francis Kamulegeya, a UK trained Chartered Tax Adviser and Certified Public Accountant.
Government is currently under pressure to drop even the 0.5 per cent tax they had proposed to remain only on withdrawals.