MTN lowers mobile wallet tax, scraps levy on sending, receiving money

On Wednesday, Speaker Rebecca Kadaga tasked Finance ministry to explain why telecoms were still charging 1% tax on mobile money transactions despite the government's revision and Parliament passing a revised Act. And now industry leaders MTN have announced reduction of the mobile money tax is from 1% to 0.5% on withdrawals effecting Saturday, November 17. MTN said there is no more tax when sending or receiving money and making payments

ECONOMY | Telecom giants MTN Uganda has implemented the revised tax measures on mobile money transactions from 1% to 0.5% on withdrawals only.

The telecom also announced that there is no more tax when sending or receiving money and making payments.

The decision comes after Speaker of Parliament, Rebecca Kadaga on Wednesday tasked Finance and Economic Planning ministry to explain why telecoms were still imposing the 1% tax despite the assenting of the Excise Duty (Amendment) Act, 2018 into law.

Sendo Cleaners

The amended Act reduces the tax that went into force on July 1 and limits its application to only withdrawals from customers’ mobile money wallets–from the initial effect on all mobile money transactions.

However, telecoms had taken their time to effect the law and continued to reap from unsuspecting clients.

On Wednesday, though, MP Lutamaguzi Ssemakula (Nakaseke South) wondered why telecom companies were still charging 1% despite the amendment.

“As we speak, most of the people who are the mobile money business have closed their business and we are wondering if it is a sign by Government to fail its own people or it is by accident. Why is it (government) taking time to gazette that law?” Ssemakula said.

Kadaga had responded by tasking the ministry to explain, but the telecoms have since responded by effecting the changes instead.

MTN said the tax will not apply to other forms of mobile money transactions like payments, sending and receiving money and deposits or buying of airtime and bundles using MTN MoMo.

“This is a welcome move that is applauded by the industry because the customers spoke, and they were listened to. MTN’s hope is that the reduction in the tax will bring back mobile money customers who had been discouraged from using the service due to the high cost of the tax,” the telecom said in a news release on Saturday.

“We believe that mobile money has greatly accelerated financial inclusion by overcoming access to money barriers. It also further promotes business, trade and commerce especially within the informal sectors of the economy and rural, hard to reach parts of Uganda which have no access to formal financial services.”

Unwelcome tax

The imposition of the tax had seen telecoms report reduction in mobile money transactions and urging government to scrap it.

Wim Vanhelleputte, chief executive of MTN Uganda, said two months after the implementation of the 1% tax on mobile money transactions that there was a drop in the transaction.

The Observer newspaper quoted Vanhelleputte as saying that mobile money supports 5,000 Savings and Credit Cooperative Societies (Saccos) and taxing the business is a big risk.

“Because we’re still a young new industry, so if you over tax a young industry you might end up killing that industry. So we need to find the right balance between taxes and growing the industry to its full potential. What is the full potential of the industry? Let us cross the border into Kenya, today in Kenya, Lyca and Mpesa are a whole new system of doing digital payments,” he said.

“In Uganda, we’re not there yet. We have the ambition to continue to develop mobile money to make sure people can use the mobile phone to do payments, payments, payments. They can go to the bar and pay for a coke using mobile money, they to the boda boda they can use mobile money to pay for the taxi.”.

Denis Kakonge, the Airtel Uganda legal and regulatory director said since the introduction of the tax, the volume of their mobile money transactions has dropped by 33 per cent. He says the tax is not only discriminative but people have no option but keep the money in cash, which is risky.

“We think that the taxation of the mobile money service which is still in its infancy, we’re not like Kenya. We’re still growing, if you tax it, it will reduce the uptake of the service and undo the positive contribution that mobile money has contributed which includes employment and making it easy for people to transfer money,” he said.

The central bank backed the telecoms in calling for the scrapping of the tax, with economists later revealing that the volume of mobile money transactions had declined by Shs672 billion within the first two weeks of July since the coming into effect of the 1% tax on mobile money.

“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 following the implementation of the 1% tax,” Charles Abuka, Director of Statistics at the central bank, told the parliamentary committee on Finance, Economic Planning and Development.

However, amid all these, the government continued to release tax reports that showed that revenue collected from the 1% tax was higher than expected.

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