Bankers oppose 0.5 % levy on agent banking
The 0.5 percent levy, if approved by Parliament, will apply on all agent banking transactions by July. Photo / File
What you need to know:
- Mr Owor insists that the said legislation would discourage Ugandans from using financial services offered by agent banking.
Members of the Uganda Bankers’ Association (UBA) and the leadership of PricewaterhouseCoopers (PWC) have asked the House Committee on Finance to reject the government’s proposal seeking to impose a 0.5 percent levy on cash withdrawals done through agent banking.
The fraternity of bankers reasoned that the proposal contained in the Excise Duty Amendment Bill, 2024, if endorsed in its current form, will frustrate government’s efforts to expand the Uganda financial sector and transactions done digitally.
In presentations made by the chairperson of the UBA, Mr Wilbrod Humphreys Owor, and Ms Pamela Natamba, a partner at PWC, it was indicated that the proposal contained in the Excise Duty Amendment Bill, 2024, would impede the growth of financial digital services.
“These agents allow financial institutions to expand their reach by offering services to remote or previously unserved or underserved markets, a large number of whom are unbanked and untapped customers,” UBA said in its presentation to MPs.
“Given that these [agent banking outlets] play a huge role in the financial inclusion strategy, a withholding tax exemption should be granted to these agents or their income,” said Mr Owor, who suggested that the said provision be dropped.
Mr Owor insists that the said legislation would discourage Ugandans from using financial services offered by agent banking.
“Agents are an extension of banks, the same way you look at an ATM [whereby] this one is a human ATM and the other one is a machine ATM. They are practically the same,” Mr Owor revealed.
He also tasked the House Committee on Finance to present their opinion to the Ministry of Finance, the architect of the Bill.
“We advise URA and policy makers that some proposals should not just look at short targets but the wider perspective. There are areas of clarification on which we need to engage the Central Bank and the Finance ministry so that they see the bigger value,” he said.
Ms Natamba also fears that the tax proposal may compel operators of agent banking to exit business. She wants other taxes that are already in the same sector to be revised.
“So we think [that] if this is going to be maintained, there are some aspects that we would like to be addressed. Can there be exemptions for the banking agents?” she asked.
In the first interaction with the Finance Committee made early last week on the said Bills, the State Minister for Finance in charge of General Duties, Mr Henry Musasizi, faced a tough time defending the said proposal. He, however, defended the new planned levy on cash withdrawals on agent banking saying it is meant to implement a law that is already subjected to mobile money.
About tax bills
The aforementioned legislation is part of a set of five tax Bills tabled by the Finance ministry on March 28. The government hopes to fetch at least Shs1.9 trillion once the Bill is passed in its current form.
