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By Wachira Kigotho
Uganda has formally announced it will reduce a tax on mobile money withdrawals and apply it only to transfers.
The tax rate will now be 0.5 percent instead of 1 percent. Cabinet’s approval of the change, announced July 17, reins in the levy, which originally applied also to sending, receiving, and depositing money in mobile transactions.
The amendment is in line with previous comments from President Yoweri Museveni, who said the 1 percent rate was a miscommunication. The tax took effect July 1.
The tax won’t apply to individuals who use mobile phones to pay utility bills or school fees, said Minister of Information Technology and Communications Frank Tumwebaze in a July 17 press conference.
The bill to amend the law will be presented to parliament July 18 for a first reading.
Uganda will keep its new tax on social media use, despite protests. The measure imposes a 200-shilling (5-cent) daily levy on persons using social platforms such as Facebook, WhatsApp, Viber, Skype and Twitter.
Prime Minister Ruhakana Rugunda had told parliament July 11 that the government was reviewing the tax, dubbed the “gossip tax.” The president has remained publicly committed to the measure.
Kyadondo East Member of Parliament Robert Kyagulanyi told Bloomberg Tax July 17 he continues to oppose the levy.
“This is a tax that will kill the digital economy, the predominant money making sector, and a component for fostering innovation and creativity,” Kyadondo said.
Steven Mugisha, the director of tax services at Ligomarc Advocates, a leading financial and corporate law firm in Kampala, said it’s more important for Uganda to widen its tax base than to focus on taxing social media use.
“The government can collect more tax by ensuring tighter controls in revenue protection and ensuring tax payer compliance through a tight taxpayer identification number registration,” Mugisha told Bloomberg Tax July 16.
He said the government needs to rein in wasteful spending and put a halt to corruption. For now, retention of mobile money tax will result to people seeking alternative means of money transactions, instead of using mobile phones.
Hadijah Nannyomo, the executive director of EY Uganda, said the government should know it is not fair to tax anybody rich or poor at the same rate.
“The government should also know that the same people paying employment tax are the ones that mostly use social media,” she said July 18. “I would not advise government to maintain this tax.”
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