Mobile Remittances Could See Tax Hike In Uganda

Many Ugandans use mobile phones to transfer money to relatives and friends. But soon they may have to pay an extra 10 percent.

BBC News reported that a new levy was presented to Uganda’s parliament last week, alongside the finance minister’s proposal to raise $16.5 million through taxes on incoming international phone calls.

If all is approved, even Ugandans living abroad will be expected to pay the fees for international remittances.

The people living in the country’s capital, Kampala, have not received the news well. They have argued that the new budget will inflict huge negative impacts on Uganda’s poorest consumers.

Maria Kiwanuka, the country’s finance minister, responded to the criticism and claimed the government was under immense pressure to compensate for the $214 million deficit in Uganda’s annual budget. The financial setback was largely due to former donors who provided aid after corruption complaints. The Ugandan government said they aimed to raise at least $12 million per year from the new mobile tax.

Sending money through mobile phones has quickly become the most popular method for people living in Uganda, much like in many other emerging markets. Mobile phone transfers are especially favored by those living in rural regions who do not have easy access to bank accounts.

Consumers in Uganda differ from those in Kenya, as mobile phones are primarily used to pay for electricity and water bills and not to pay for products in shops.

According to BBC News, Kiwanuka informed the members of parliament that Ugandans in the diaspora received $767 million in remittances over the last 12 months. A mobile phone transfer vendor located in Kampala told BBC News he facilitated an average of $8,000 in transactions each week.

Some Ugandans even choose to receive their entire salary through their mobile phone, which essentially serves them much like an ATM.

“It’s very unfortunate that Ugandans are being squeezed both ways,” another mobile phone transfer agent in the capital told BBC News.

“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.”

The Daily Monitor newspaper of Uganda reported that if the mobile money transfer tax was approved, nearly 9 million consumers across six mobile operator networks in Uganda would be affected.

Predictably, mobile phone companies are complaining about the new levy as well.

Phiona Wall, communications manager at Airtel Uganda, said, “In telecom we are trying to increase affordability and things like mobile money transfer revolutionized money transaction so when you increase tax, there is a contradiction.”

The Managing Director at Uganda Telecom, David Holliday, was in a similar mindset, and explained the new taxes would imply a substantial rise in service costs.

“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.”

To read the full story at BBC News click here.