Uganda to tax mobile money transfers

 
A woman using a mobile phone in Uganda - July 2012 Ugandans often use mobiles to transfer money to those without bank accounts

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Uganda is to impose a 10% tax on cash transfers by mobile phones and other money transfer operators.

International remittances from Ugandans living abroad are also affected.

Finance Minister Maria Kiwanuka said she also planned to raise $16.5m (£10.6m) by imposing a levy on incoming international phone calls.

Ms Kiwanuka had to come up with ways to plug a $214m hole in the annual budget after donors cut aid over accusations of corruption.

The BBC's Catherine Byaruhanga in the capital, Kampala, says there has been criticism that the budget - presented to parliament on Thursday - will hit poorer Ugandans hardest.

Analysis

Transferring money by mobile phone is the most popular way of sending money to relatives, especially those in rural areas who do not have bank accounts.

Unlike in Kenya, mobile phones are not often used to pay for items in shops, but they are used to pay bills like electricity and water.

Having a mobile phone money account is also popular with small market traders who may not qualify for a business bank account - and at the end of the day they tend to put all their takings on their phone.

One mobile phone transfer vendor in Kampala told me this week that on an average day he oversaw $8,000 in transactions with people sending or receiving cash.

Some people even opt to put their whole salary on their phone, so it effectively becomes an ATM.

Ms Kiwanuka told MPs that in the last year $767m worth of remittances had been received from Ugandans in the diaspora.

According to Uganda's private Daily Monitor newspaper, the new mobile money transfer tax could affect the 8.9 million customers using six mobile phone networks in Uganda.

The government hopes to raise $12m annually from the tax, it reports.

Mobile money transfers are extremely common in Uganda as many people, especially in rural areas, do not have bank accounts.

Transfers are used to send money to relatives and even settle some bills.

"It's very unfortunate that Ugandans are being squeezed both ways," Simon Mpagi, a mobile phone money transfer agent, told the Reuters news agency from his retail shop in Kampala.

"They steal our taxes and donor money... leaving public services to near-collapse and now when donors get angry and cut them off, then they come to us and punish us again by raising taxes to grab even the little income we struggle to make."

Phiona Wall, communications manager at mobile phone company Airtel Uganda, said she felt there were contradictions in the budget.

Start Quote

Maria Kiwanuka - Uganda's finance minister

Really the budget is not about new taxes, it's about... collecting the uncollected”

End Quote Finance Minister Maria Kiwanuka

"In telecom we are trying to increase affordability and things like mobile money transfer revolutionised money transaction so when you increase tax, there is a contradiction," she told Uganda's state-owned New Vision newspaper.

David Holliday, managing director of Uganda Telecom, said the new tax would mean a significant increase in the cost of the service.

"Mobile money has become part of people's everyday lives because they don't need to carry cash. Even those who were formally unbanked have mobile money accounts with a service provider of their choice because it's cheap," the Daily Monitor quoted him as saying.

Ms Kiwanuka said the aim of the budget was to target those who avoid or do not pay taxes and set targets for the revenue authority to make sure taxes are actually collected.

"All the tax proposals that have been mentioned add up to about 3% of existing taxes and they're still subject to parliamentary approval," she told the BBC.

"That percentage shows you that really the budget is not about new taxes, it's about… taxes already due be paid. Collecting the uncollected."

The UK, Denmark, Ireland and Norway have all suspended some aid to Uganda following allegations that millions of dollars had been transferred from Prime Minister Amama Mbabazi's office into private accounts.

Mr Mbabazi has acknowledged that money has been stolen from his office, but denies any involvement.

The stolen money has been returned.

 

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  • rate this
    +1

    Comment number 44.

    Has anyone ever taken a look at their land or mobile phone bill in the USA and tried to figure out the amount of various taxes paid? Talking on the phone does not create any new money, yet it is taxed up the ying yang. I am not saying that taxing money that is simply being transferred is a great idea, but each country must cut the cord that keeps them under the feet of European aid.

  • rate this
    +1

    Comment number 43.

    Knowing how resourceful Africans are, I'm sure the Ugandans will find a way of getting around this iniquitous tax.

  • rate this
    0

    Comment number 42.

    Remittances from the Ugandan diaspora were $767m in 2012. That's >80% of budget allocation to ALL road projects in the 2013/14 budget).
    Without much thought, the government imposes more taxes on money transfers(10% on both local and INTERNATIONAL transaction fees), then INTERNATIONAL phone communication etc, rather than pursue embezzlers of public funds, to recover lost monies. Ridiculous!

  • rate this
    +1

    Comment number 41.

    This is robbery & Double taxation! The proposed tax on remittance is vexing. Nkubakeyos work many hrs in hard conditions and pay taxes at source.

    Now we have to pay taxes on meager savings that we send to feed those @ home. What will the new levy do? Buy junk choppers and army tanks? Will it improve consular services we get abroad?

    And by the way can we be allowed to vote while abroad?

  • rate this
    +1

    Comment number 40.

    Totally agree, all the aid to india has hardly improved our trade relations and nor should we expect it to. India has decided to buy french fighter jets not british! We should stop aid and focus on providing trade agreements and ensuring multi-nationals aren't ripping off governments in africa and pay a fair share of tax

 

Comments 5 of 44

 

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