Mobile money recovers from effect of taxation

Wednesday July 31 2019

Recovered. Mobile money transactions across the

Recovered. Mobile money transactions across the board recovered from the effect of taxes closing 2018 with growing numbers. PHOTO BY EDGAR R BATTE  

By Christine Kasemiire

The value of mobile money transactions registered in the three months leading to December 2018 increased to Shs18 trillion up from Shs14.8 trillion in September.
A report released by Uganda Communications Commission (UCC) for the quarter ended December 2018 indicates that more money was moved through mobile money service in the last quarter of 2018.
“The value of transactions, balance on customer accounts and the number of transactions all grew by 21.1 per cent, 17.4 per cent and 12.8 per cent, respectively in the third to the four quarter,” the report reads in part.
The value of transactions for the period, grew from Shs14.8 trillion in September to Shs18 trillion in December while balance on customer accounts grew to Shs338b from Shs288b in the previous quarter.
Mobile money transfers are experiencing a “return” to activity after a shock when government imposed a new tax on the service.
Government in August last year imposed a 0.5 per cent levy on all withdrawals on mobile money, which saw a drop in transaction volumes to Shs14.8 trillion.
Uganda Revenue Authority, in its annual results indicated that it had collected Shs157.2b from mobile money tax above the projected Shs115b.
However, in the same period (fourth quarter of 2018), active users dropped by 3.6 per cent to 13.6m from 14.1m in September.
“The number of active mobile money subscription which registered business in the last 90 days dropped by 3.6 per cent,” the report reads.
Mobile money subscription, however, grew during the period to 24.4m from 23.2m in September.
Essentially, this means the few active mobile money users are transacting bulk cash. The number of transactions also increased from 554m to 625m in December.

Increased charges
The changes come at the time when there has been an increase in mobile money charges by major players in the industry.
Recently, telecoms increased charges by a range of Shs20 for minimum and Shs3,450 for maximum withdrawals. However, they have since cut some of the charges but specifically for promotional purposes.
Dr Fred Muhumuza, an economics lecturer at Makerere University, told Daily Monitor the tax was expected to have a marginal but not severe disruption, noting it could perhaps “have reduced the growth rate than it ought to have been”.
Mobile money, because of its importance and lack of a viable alternative, Dr Muhumuza said, has forced people to absorb the tax and costs.
He, however, noted that it is unfair for government to take advantage of people who have no alternatives.

Agent increase
Mobile money also saw an increase in agent numbers from 163,082 in January to 184,529 in December last year.
According to Dr Muhumuza, agents’ growth is directly related to mobile money which has been growing over the years.
He, however, questioned whether the increase has been a result of increased profitability or a drive to create employment.