Yesterday, the Daily Monitor ran a story indicating that mobile money transactions in Uganda have dropped by 60% in 5 days. That’s from when the 1% tax on mobile money came in effect.
Yet, this shouldn’t surprise us. That’s according to a submission made by ICTAU and PSFU to the Parliamentary Finance Committee in May.
“Together with the ICT Committee of the Private Sector Foundation, the ICT Association of Uganda (ICTAU) presented the private sector position on the taxes that had at that time been proposed, including mobile money and OTT services.”
— Evelyn Namara (@enamara) July 5, 2018
In a presentation to the committee, that has since been compiled into a 7-page document [PDF], the two pointed out the likely consequence of the tax. Together with the tax on OTTs, now dubbed the social media tax.
They pointed out that the “tax burden on the telecom sector is already high.” Thus, “any increase in taxation will discourage consumption.” This would definitely stifle growth hence reducing revenue to Government.
The document pointed out that around “35% of the [telecom] industry revenue is paid to the government in taxes translating to about UGx. 1 Trillion.”
Also read: These are the Ugandan startups in Hangzhou participating in Alibaba’s eFounders Initiative
Both ICTAU and PSFU proceeded to make recommendations on the way forward.
Among these was encouraging “growth in penetration.” This, they argued, would result in growth in Industry Revenue. Which, automatically, would increase taxes to the government.”
They also recommended fair taxation of all banking financial services for fairness.
“All banking financial services should be taxed at the same rate as Mobile Money to ensure non-discriminatory taxation of financial services.”
The general conclusion was that taxes on the digital financial services should be revised. That’s if there’s to be an increased uptake in the above services.”
“Our call is on the Authorities to not only consider reduce the taxation on digital financial services but devise means of promoting usage of the service hence converting the over 40% of the dormant base of registered users to effectively use the service from which additional tax collection shall be tapped.
Ever since the taxes came into effect, only ICTAU – of the two – has come out to issue a statement [PDF]. It expressed concern about the negative impact they might have on the economy.
“The ICT Association of Uganda (ICTAU) is gravely concerned about the recently implemented taxes on Mobile Money and Over-The-Top (OTT) services,” read the statement.
“These taxes were enacted by the Government of Uganda without sufficient deliberation or consultation and are not supported by evidence-based research. They will undoubtedly constrain the development of our industry, economy, and society.”