Mobile Money dealers in Kampala have warned of a collapse of the service by the end of the year if government does not drop the 0.5 per cent tax on withdrawal transactions.
Norman Batuuma, the team leader of the Mobile Money Dealers Associations in Kampala said the transactions have dropped by 30 per cent since the introduction of the tax in July.
Batuuma noted that such charges have forced 236 agents with less than a year in the business to close shop in Kampala and Wakiso.
“Experienced agents still hang on with hope of a positive change as they look for opportunities elsewhere,” said Batuuma.
The dealers appeared before the Committee On Finance, Planning and Economic Development to make their submissions on the Excise Duty (Amendment) Bill No. 2 on Wednesday, 08 August, 2018.
Government introduced a 15 percent of fees charged for the transfer or withdrawal services, including transfers and withdrawal services by operators licensed or permitted to provide communications or money transfers or withdrawals but not including transfers and withdrawal services provided by banks
In addition, government also introduced a 1 percent of the value of a transaction on receiving, payments and withdrawals of mobile money transactions in the budget for the financial year 2018/2019.
The Excise Duty (Amendment) Bill (No. 2) 2018 seeks to reduce the tax to 0.5 percent and to only apply to withdrawal of mobile money transactions.
Batuuma noted that the tax has also pushed youths out of employment since the majority of the operators are young people.
“The drop in transactions will also affect government because it means that taxes collected will not meet the intended target,” Batuuma added.
Members of Parliament said that whilst the tax has impacted negatively on majority of Ugandans, the dealers need to provide government with practical proposals to expand the tax base.
“I propose that government leaves people to operate their MM business without the tax. Let government instead tax cattle. I propose that for every 100 cows, government takes one,” said Hon. Paulson Luttamaguzi (DP, Nakaseke County South).
Lawrence Bategeka (NRM, Hoima Municipality) re-echoed the recommendation by the Central Bank to scrap the tax.
“Let us look for other alternatives. We need to be considerate to the majority of Ugandans who are depending on mobile money,” said Bategeka
The Chairperson of the Committee, Henry Musasizi however, queried the dealers over their decision to increase transaction charges before the 0.5 percent tax was effected.
He revealed that for withdrawals within shs1million, charges were increased from shs10,450 to shs12,500 in June.
“We need you to go and explain to the clients why you increased these charges because they are not aware,” said Musasizi.