Uganda nets Sh188mn from social media, mobile money tax

What you need to know:

  • According to the country's Minister for Finance, about Ush11trillion is sent via mobile money platforms while Ush23 trillion is withdrawn every month.
  • A Monday Cabinet meeting at State House Entebbe agreed to apply the mobile money tax only on withdrawals.
  • The social media tax that has stirred public outrage. 

Uganda announced Tuesday that it has so far collected Ush7 billion (about Ksh188.4 million) from the newly-introduced tax on social media and mobile money transactions just a week into the new financial year.

Minister for Finance David Bahati said that although Cabinet approved a reduction of excise duty on mobile money from 1 per cent to 0.5 per cent, the drop would not affect earlier government estimates of collecting Ush118 billion (about Ksh3.2 billion) from the tax that has stirred public outrage. 

Mr Bahati said that a Monday Cabinet meeting at State House Entebbe agreed to apply the tax only on withdrawals and not money that was being sent.  

“As long as you are not cashing out money, you will not pay the tax but if you do, you will make the contribution of 0.5percent. We expect that if we charge the levy of 0.5 percent on withdrawals only, we will still raise Shs118 billion which is slightly above Shs115 billion we had estimated,” the minister said.

The amended bill, Mr Bahati said, will be presented on Wednesday in Parliament for the first reading.

According to the official, about Ush11 trillion is sent via mobile money platforms while Ush23 trillion is withdrawn every month.

“The estimation we had as we started, we expected to have Shs2.5 billion from mobile money but the week we have implemented this, we have raised Shs5 billion. We are ahead of target. Nothing in the budget will suffer after reducing the tax from 1 percent to 0.5 per cent because transaction of 23 trillion will raise Shs118 billion,” he said.

ICT Minister Frank Tumwebaze said the initiative is supposed to discourage cash transactions for easy monitoring and security purposes.

“This business of mobile money services started as a trial. Even telecom companies were never licensed for that. Their licenses kept on being amended to value added service. But the service has grown to 63 per cent of the GDP. That tells you that networks have to be upgraded. That tells you Ugandans are saving money not banking yet the banking sector is contributing to GDP,” Mr Tumwebaze said.

Social media tax here to stay

However, on social media tax, Finance Minister Bahati said people who wish to access social media will continue to pay Ush200 (about Ksh5), insisting that there were moral justifications for the levy.

President Yoweri Museveni also affirmed that the tax was here to stay despite public uproar.

“The social media users have no right to squander the dollars I earn from my coffee, my milk etc by endlessly donating money to foreign telephone companies through chatting or even lying and, then, they are allergic to even a modest contribution to their country whose collective wealth they are misusing,” said Mr Museveni in a statement he posted on his Facebook page earlier this month.

On the issue of blocking VPN which other users have opted for to avoid paying OTT tax, Mr Tumwebaze said patriotic citizens should pay if they want to demand services from the government.

“Whether UCC succeeds in blocking VPN or not, I am not enthusiastic about blocking it. Ask yourself how much you are spending on data for you to download VPN to enable you bypass capacity?” he asked.

“If you are really a committed Ugandan and want services from your government, why are you motivated to contribute money 30 times higher than the OTT tax to the innovator of  VPN? Why don’t you want to contribute to your economy and when Bahati or Kasaija are borrowing we are bashing them for borrowing. This why I call for logical debates.”