Mobile money tax will stifle financial inclusion, says report

TAXES | The government’s intention to stamp down tax on mobile money services will suppress financial inclusion in the country considering that nearly half of the population rely on the mobile wallet forms rather than conventional banks.

A recent baseline survey done by Twaweza East Africa indicates that since its launch in 2009, access to mobile money services have outpaced formal banking, helping 68% of the citizens to access financial services across the country.

People can only be considered financially included when they have either an account with a bank, Sacco or a microfinance institution.

Sendo Cleaners

In 2012, Bank of Uganda launched a five-year plan to strength financial inclusion among the populace.

This was in the process of implementing various initiatives to improve financial inclusion in Uganda as a response to financial innovations, gaps in financial education, financial consumer protection issues, opportunities in the context of financial innovations, financial deepening issues as well as issues of access and quality of financial services.

And according to the survey conducted under the Sauti Za Wananchi programme, 44% of Ugandans who do not have an account with banking institutions now largely rely on mobile money accounts on their phones.

Twaweza is a local NGO that runs a survey under its Sauti za Wanainchi (Voices of the Citizens) programme to inform policy makers on action fronts using citizenry views.

It therefore revealed that with government intending to slap a 0.5% tax on the service will limit women and the young who particularly depend on mobile money services as they still have a low level of access to formal financial institutions (banks, SACCOS, MFIs).

Parliament was due to hold a fresh vote on the controversial mobile money tax on Tuesday after a similar undertaking failed to take place last week.

The tax proposal presented in the Excise Duty Amendment Bill (2018) seeks to reduce the current one per cent levy on all mobile money transactions to at least 0.5 per cent in line with President Museveni’s directive in July.

If passed into law, government intends to collect Shs115 billion to fund part of its budget, similar to the same amount targeted with one per cent.

However, the Bill has since attracted protests from a section of MPs who have cited discrimination, lack of equity and clarity of a collection mechanism.

When it was presented last week, the mood in the House was tense, with several MPs fleeing the plenary to avoid a possible vote call.

The majority report backed the government’s 0.5 per cent yet the MPs, who signed the minority report, wanted the tax scraped in public interest.

Last week voting on the bill flopped after the house failed to realize the needed quorum.

To vote on the Bill, the House required 154 MPs present yet the head count revealed that only 97 out of more than 450 MPs were in attendance.

Bill opposed

However, lawmakers opposed to the Bill contend that there is no law to regulate the use of mobile money.

Mobile money services are already faced with huge transaction fees which has registered a decline in the number of users.

MPs from the ruling NRM party say the tax will generate more revenue to support the budget whose priorities are already committed.

John Baptist Nambeshe the MP for Manjiya County has then warned fellow MPs against voting in support of the bill as it oppresses locals.

“I want to warn all my caucusing friends, come 2021, you have already condemned yourselves to political oblivion; this is a tax that is very repressive, prohibitive and painful to the people who voted us. If you do not have compassion, you do not have your people at heart,” Nambeshe told the media on Monday.

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