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PwC Auditors Slam Proposed Mobile Money Tax

Kamulegeya slams the proposed tax as very punitive to the citizens of Uganda who have embraced mobile money platforms as a means to effect the movement of funds in their day to day business and private transactions. He says that the new tax will apply to the customer over and above the fees that the telecom company will charge the customer for using the mobile money service.
Officials from Price Waterhouse Coopers led by their Director Francis Kamulegeya appearing before Parliament's Finance Committee.

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Audit firm, PricewaterhouseCoopers has warned that some of the proposed tax policies for the financial year 2018/2019 are likely to be challenged in courts of law if approved by parliament.

Francis Kamulegeya, the Director of PricewaterhouseCoopers Uganda pointed out the proposed 1 percent tax on Mobile Money transactions as a matter of contention.

He argues that mobile money transactions are already subject to excise duty at a rate of 10 percent under Section 4 of the Excise Duty Act 2014, (EDA) which imposes excise duty on excisable goods and excisable services.

By contrast, Kamulegeya says that the new tax will apply to the transaction value and not on the provision of any service hence the duty not able to be imposed under the EDA and effectively overpowers the current legislation.

Kamulegeya slams the proposed tax as very punitive to the citizens of Uganda who have embraced mobile money platforms as a means to effect the movement of funds in their day to day business and private transactions. He says that the new tax will apply to the customer over and above the fees that the telecom company will charge the customer for using the mobile money service.

He also described the new duty as discriminatory since it does not apply equally to cash, bank or other money transfer transactions. Kamulegeya says that the tax poses a serious risk of distorting economic behaviour and driving many unbanked citizens back to the old days of transacting in cash.

Kamulegeya recommended that government scraps the proposed tax since it is likely to have a negative impact on the growth of the mobile money sector as it will become very expensive to use the platform to transact which is detrimental to the financial inclusion agenda.

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Kamulegeya also warned that the government will not be able to generate the expected revenue from the proposed 200 Shillings daily levy on social media users. Government is projecting to collect 284 billion Shillings from users of social media platforms like WhatsApp and Facebook, among others.

"While the definition of Over the Top Services (OTT) excludes use of the internet to access educational or research sites prescribed by the Minister in the Gazette, it remains unclear how the telecom companies will be expected to distinguish data used for accessing social media platforms like WhatsApp from that used to access educational websites," Kamulegeya said.

He further noted that telecom companies will also have no mechanism for charging the proposed tax once the user converts the purchased airtime into data.

PricewaterhouseCoopers says that in practice, some of the bundles that users load to grant them access to internet platforms cost as low as Shillings 100 per day and therefore a fixed 200 Shillings per day levy would be disproportionately level of taxation in such a case.

Kamulegeya says that this new tax proposal requires additional research and consultation with the Telecom sector before it can be properly implemented.

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The government expects to generate 951 billion Shillings from all the proposed new policy measures and another 272 billion Shillings from administrative efficiency to achieve the policy target of 0.5percent in line with the National Development Plan II.

The proposed taxes include corporation tax on profitable SACCOs, the 200-Shillings levy on every litre of cooking oil, 10 percent final withholding tax on commissions paid by telecommunication companies to mobile money and airtime agents.

The others are the proposed increase of excise duty on diesel and petrol by 100 per litre Shillings, enforcement of 1 percent withholding tax on persons engaged in agriculture, 200 Shillings daily levy on social media users like WhatsApp and Facebook others.

Government targets to raise 16.2 trillion Shillings in the 2018/2019 financial year with a projected growth of 7.6% compared to a target of Shillings 14.4 trillion in the current financial year.