Photograph — UNDP

The Ugandan government has announced its intentions to reduce taxes on mobile banking and mobile money transactions to cushion the impact of COVID-19. 

The announcement was made on Thursday, 11, 2020, by the country’s Finance Minister, Matia Kasaija, while presenting the 2020/21 fiscal year’s budget. For a country where many have lost faith in mobile banking, this could better participation.

This proposed plan comes with other measures announced by the Finance Ministry. The other measures include the provision of credit to small and medium-sized businesses through cooperative societies, the restructuring of distressed loans by banks and clearing of arrears to government suppliers.  

Mobile banking was successfully launched in Uganda in 2009 with a business model which involved a partnership between a mobile money operator and a commercial bank. Therefore March 2009 saw telecoms giant, MTN, led the innovative introduction of its mobile money packages in the Ugandan market. 

MTN’s move aligned with the universal goal of Mobile Financial Services (MSF) to create financial inclusion, customer comfort and ease of transactions with a zeal to curtail the endless queues in banking halls.

As of 2013, over 22 million people have used mobile banking services in Uganda. Although growth in mobile banking was phenomenal, services were restricted to domestic remittances, basic retail payments and money storage services in the country.

But the initiative was soon greeted with a high tax regime which translated to a high cost of operations. This also led to poor output and increased charges for customers, causing a nosedive on the number of users of mobile banking platforms. According to a report, some high charges incurred on transactions via mobile banking apps have forced people to use the banking halls instead. 

In a news report, the Ugandan Finance Ministry in 2013, while presenting the budget,  announced the imposition of a 10 percent tax on cash transfers by mobile phones and other money transfer operators. International remittances from Ugandans in diaspora were also affected. The budget was highly criticised because it would have a severe impact on rural households, who have limited access to banks.

Again, in 2018, the government introduced a tax of 1 percent on mobile banking. This was under the tax proposals contained in the Excise Duty (Amendment) Act of 2018. According to the Act, “a tax of 1 percent of the value of the transaction will apply on mobile money transactions on receiving money, making payments and withdrawals of money.”

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