Monday July 9 2018

Mobile money tax will disrupt financial inclusion agenda, activists say

A mobile money transaction. The 1 pe

A mobile money transaction. The 1 per cent tax on mobile money has caused an uproar in Uganda. FILE PHOTO  

By Monitor reporter

The introduction of Mobile Money and Over the Top services tax will disrupt Uganda’s financial inclusion agenda and the country’s pursuit of economic development, according to civil society organisations.

The civil groups say the tax that has been massively condemned in Uganda mainly targets the poor than the rich and will drive many young people who have been using the Internet to innovate into redundancy and poverty.

During a press conference on Sunday in Kampala, officials of the Tax Justice Alliance who are drawn from Action Aid Uganda and SEATINI-Uganda said, any government that works to lift people from poverty cannot resort to “imposing taxes which are non-cognisant of the principles of fairness, certainty, convenience and efficiency”.

“This will negatively affect the struggling players in the economy like micro, small and medium enterprises including farmers and further breed the growth of inequality, Ms Jane Nalunga, from SEATINI-Uganda said.
According to Ms Nalunga, the 2017 Uganda Communications Commission (UCC) report indicated that mobile money subscriptions stood 23.6 Million Ugandans, with 61 percent transactions below Shs45,000, which implies that the platform has been biggest driver of financial inclusion.

Citing the UCC “Postal, Broadcasting and Telecommunications Annual Market and Industry Report of 2016/2017 that placed internet penetration in Uganda at 45% from 31.3 % by December 2017, according to the Internet World Statistics, the activists say, the admirable increase is bound to suffer stagnation.

“The over the top services platforms have been key in driving the penetration of the net and greatly serving as platforms for educational material, spread of news and enhancements for civic engagement and also creating awareness about existing government programmes,” Mr Kimbowa said.

Mr Fredrick Kawooya, the campaigns manager at Action Aid Uganda said they believe that such the new taxes are symptoms of Uganda’s ailing economy.

“The country is facing enormous challenges especially regarding revenue mobilisation, allocation and utilisation,” he said. “Worse still, the utilisation of public resource in Uganda is highly questionable. There is a high rate of fiscal indiscipline characterised by a high rate of corruption. Furthermore, the government is increasingly relying on debt to for re-current expenditure which does not yield any returns to pay back the debt.”

He said policy makers need to understand that the collection of a tax not only requires substantial coercive power, but also the legitimacy of the state, since the majority of tax is collected when there is a high level of voluntary compliance.

Mr Kawooya said while the government expects to collect Shs115 billion and Shs284 billion from the taxes on Mobile Money and Over the Top services respectively, it should be noted that Uganda loses between Shs90 billion and Shs1 trillion annually, due to tax exemptions that are awarded with the aim of attracting investors.

The activists say that instead of “harassing the poor through unfair taxes” the government must check public administration expenditure particularly the "oversize cabinet, bloated parliament, extensive network of presidential advisors and presidential assistants and a host of quasi-public service appointments" that undermine cost-efficiency.

They applauded the petitioners who are challenging the new taxes in the Constitutional Court.

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