Proposed 1% tax on mobile money may hurt SMEs

May 7, 2018 in Financial Services, Technology & Telecoms by Editor

May 7, 2018—Owners of small and medium enterprises (SMEs) will face the worse of the effects from a proposed 1% tax on all mobile money transactions according to the Civil Society Advocacy Group (CSBAG). Latest Bank of Uganda figures show that during 2017 these transactions totaled UGX54 trillion ($14.5 billion).

The government plans to make it official in the forthcoming national budget for 2017/18 next month in a bid to increase annual tax revenues.  CSBAG says the tax will hurt SMEs, because they use mobile money services substantially more than bigger companies in the course of their day-to-day business operations.

However, Julius Mukunda, the CSBAG executive director told legislators last week as part of a campaign to force the government into making an about-turn, 61 % of the MTN  mobile  money  clients  transfer less than UGX45,000 ($12). He said imposing the 1% transaction  value tax  will negatively impact  this segment of  customers who mostly live in rural areas and rely on the service.

According to CSBAG the government  should instead  increase the excise  duty  from 10% to 17% on mobile money withdrawal fees.  CSBAG believes this could generate about UGX122 billion (nearly $33 million).