Mobile Money use drops by Shs672 billion in two weeks

A mobile money agent waits for customers in Kampala last month. PHOTO BY ABUBAKER LUBOWA

KAMPALA- Mobile Money use fell by more than half a trillion Shillings following the introduction of tax on the transactions, Bank of Uganda (BoU) has said.

Mr Charles Abuka, the BoU’s director of statistics, said: “…the value of Mobile Money transactions declined by Shs672 billion in the first two weeks of July 2018, compared to the first two weeks of June 2018, in part, following the announcement of the Excise Duty Amendment Act, 2018, introducing a tax of one per cent of the value of the transaction that would apply on mobile money transactions.”

Mr Abuka told the parliamentary Committee on Finance yesterday that the decline suggests users could have switched from electronic transacting to cash.

“That is what we have seen over the last two weeks of implementation, just comparing July and June; a sort of back-of-the-envelope calculation. It is not definitive; it is not going to tell you that this is how it is going to be. But that is what we have seen,” Mr Abuka said.

He said the bank’s recommendations, which are implied therein, touch on the tax policy. The tax policy, Mr Abuka said, should be broad-based and encourage sectors that are growth points, for example, mobile money.

He said tax policies should be simple and easy to understand and should support emerging services as Mobile Money. If productivity improves, Mr Abuka said, it supports growth in a broad-based way across the economy and across sectors.

He said the economy would benefit where it is easier to move money faster across a number of people and sectors.

Mr Abuka, who was accompanied by BoU director of national payments system, Mr Mackay Aomu, his deputy Ivan James Ssettimba, and the deputy director economic research, Ms Christine Asiimwe Namanya, said the government could derive more if the tax is lowered.

“It is not the case that high taxes help to generate revenue; it might be the case that when you lower them, you get more advantages that can have positive impacts on government revenue,” Mr Abuka said.

He added: “The tax is neither neutral nor equitable between like forms of business activities. The same [tax] does not apply to withdrawals from banks or microfinance institutions or SACCOS.”

“In this sense, neutrality also entails that the tax system raises revenue while minimising discrimination in favour of, or against, any particular economic choice.”

Business dropped
Appearing before the same committee, the MTN chief executive officer, Mr Wim Vanhelleputte, said their business dropped by 30 per cent following the introduction of the tax on Mobile Money.

“In general, four weeks up to Sunday [July 29, 2018], after we implemented [the new tax], we are down in terms of revenues by about 30 per cent compared to June,” Mr Vanhelleputte said.

“Our expectation is that if the existing tax regime remains unchanged, we will continue going down further maybe even 35 per cent or even 40 per cent by the end of the year,” he said.

Mr Vanhelleputte said as a result of the tax, Mobile Money agents, who, he said, number 150,000, are getting 40 per cent less of what they used to earn, and that they now have to pay a 10 per cent withholding tax, which they were not paying before.

He said whereas 23 million Ugandans are on the Mobile Money platform, for MTN, only 10 million are active.

“As MTN, we have six million active users. I know that Bank of Uganda is declaring, rightfully, 20 [million] and more (enabled), Mobile Money customers. But the ones that are active, using the service, for us MTN is six million – extrapolated to the whole country, we are about 10 million active users,” he said.

He said many customers have now lost trust in the (Mobile Money) system. They are now moving to cash or bank transactions, Mr Vanhelleputte said.
Excise duty on banks increased from 10 per cent to 15 per cent, meaning that they, too, have increased some of their charges – though not necessarily on deposits.


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