Cabinet must repair image dented by OTT and mobile money taxes

Cabinet has announced the first step in repealing a further excise duty on the deposit and withdrawal of Mobile Money. It has proposed to retain taxes on withdrawal of Mobile Money. It is a welcome exercise to reclaim some wasted political capital.
In the Financial Year 2018/2019, government announced a number of taxes, which are threatening to freeze the money-transfer chain and payments system in the country. It imposed a 1 per cent tax on deposit and withdrawal of Mobile Money, a loosely regulated communications platform that is a major payment instrument in the formal and informal sectors. About 40 districts in Uganda do not have a commercial bank.
The MP for Butemba County in Kyankwanzi, Pentagon Innocent Kamusiime, a trained midwife, made this point on the floor of Parliament stating that his expansive district does not have a branch of a single bank. Some more established districts like Kalangala, Mpigi, Kiruhura have just one major bank branch requiring the public to transact via mobile money to avoid long distances to access banking services. Mobile Money eco-system also reflects family structures in Uganda dominated by one earner and scores of beneficiaries, so a tax on the recipients is actually a tax on the sender, who has to underwrite this cost.
In other areas, government has imposed final withholding tax, a form of income tax in addition to other taxes imposed in 2017/2018 financial year, including the advance income tax on entire sectors like transport. Government’s attempts to widen the tax base have touched on the fragile coffee sector, which is current in a price slump and will completely freeze voluntary efforts by farmers to bulk coffee and move it up the value chain. This will condemn them to coyotes, who purchase coffee cherries for a song at a time when the coffee borer and desert like conditions are wrecking coffee shrubs in the Lake Victoria region, south and west Buganda.
My son-in-law, a large coffee operator on Saturday, spent half an hour asking me about this withholding tax, which is threatening the survival of their brand new 400 farmer cooperative. My advice, it won’t be possible to explain the tax to farmers without rifling feathers. The fish industry, where people hunt for fish, is in the same dilemma.
In the banking sector dominated by “free services” government increased the excise duty on banking fees and charges from 10 per cent to 15 per cent. This means payment of a URA tax invoice went up from Shs2750 in bank charges to Shs2825. And this is before URA collects the line item from the taxpayer. Many court applications cost Shs2,000, Shs4,000, Shs10,000, but attract an indirect tax of more than 100 per cent in bank charges and tax surcharges reducing access to justice for the poorest and most vulnerable in society.
The President has been candid explaining government’s need for money and how new taxes like OTT cannot be reversed. The debate in the wider context may migrate to legal ways of collecting this tax. Should this tax be imposed on all speech – is the requirement to pay the tax via Mobile Money, constitutional requiring payees to use a private commercial service, which isn’t available on all networks.
There are also anti-trust concerns as Mobile Money is a service dominated by one telecommunication company, MTN.
How we migrated to become Greece and Italy, the doyens of indirect taxes is anyone’s guess. But it’s clear, government failed at the grassroots, with its responsibility to consult. The “man with the hat” now is becoming a problem on his own proposing ridiculous expenditures like armoured cars for Members of Parliament.
The population is worried, once they adopt an anti-tax posture, they are exposed to threats, intimidation, blackmail as their banks are all in-house in crannies of the body, bras, socks, pillowcase and under the big stone in the granary. That was the legacy of repeated currency reforms (read massive devaluation) that destroyed the economy in the past.

Mr Ssemogerere is an Attorney-at-Law and an Advocate. [email protected]