The mobile money tax drama and it’s expected revenue

Mobile money tax was ushered in on July 1st 2018. Since the, the Government has never looked back on choosing whether to proceed with implementing this tax more or consider the views of the people crying out loud for the high taxes imposed on a fast growing mobile banking side.

MTN Mobile money leading the highest revenue statistics followed by its one on one competitor Airtel money are set to bring in 18Bn shillings monthly to Government. Even though, the finance ministry urged all companies to refund the illegally collected taxes to customers. None of the two mobile money lords have refunded a single shilling by time of writing.

The fate of OTT Tax and Government’s plans for its in Uganda

VPN apps in Uganda are widely used for only one single reason which is to bypass social media tax currently similar to the 2016 presidental elections situation where the platforms were deliberatly blokced.

OTT tax or social media tax in Uganda was commented on as a tax that is for now not going anywhere given the many protests by opposition leaders against this tax as it still trends online. Among the few tricks UCC is reportedly working on is to block each and every VPN inorder to force users to spend UGX 200 daily on tax, a mesare that for now is unsuccessful. Therefore, all taxes remain intact and as the minister commented on Government’s measures, enough revenue has already been generated in less than 1 month from the 2018/19 budget flag off.

According to the ministry of FInance, all mobile money services are taxed separately and their’s no bid for less but instead higher tax for a hefty transaction. Well, here is how Gov’t will chop off its 1% tax on every transaction you make via Mobile money.

Sending and Receiving Money

When sending and receiving money, the usual withdraw and sending telco fees lead the budgeted list starting from UGX 330 for the down low transactions. The moment you enter a registered mobile money number to send funds to and confirm with your pin, Gov’t calculates a 1% tax off the total sent amount before deducting Telco sending fees that follow the route to a digital destination. Then, as soon as your recipient receives a Mobile money message indicating the airlifted funds in the text body, Gov’t would have chopped a 1% tax off the received amount in return. While on withdraw URA collects a 1% tax on the initiated amount. Your service provider will charge you the normal withdraw fees as to receive the remaining cash from your withdraw point.

Example:

Paying Goods and Services

Mobile money before its glory days was simply a digital transactions platform. However, as institutions embraced emerging technologies to their benefit. Users can conveniently pay for social services and goods wherever and whenever. In addition to the convenience met when clearing owed funds flying you right in front of a long Que. Gov’t charges you a hefty 1% as well on the total amount transacted. Assuming you are paying Packing fees amounting to UGX 20,000 this means URA deducts UGX 200 as 1% tax before Telecom charges of about UGX 1000 totaling to 2,1200/=.

Example:

To Pay: 20,000/=
1% Tax: 200/=
Telecom Charges: 1000/=
TOTAL PAID: UGX 21,200

Saving and Borrowing with Wewole or Mokash

Mobile loans and Savings conquered mobile money by storm when MTN first rolled out its Mokash service in partnership with CBA a few years ago. 2 years down the road, Users enjoy the comfort of borrowing with no security guarantees teased on to them. However, as URA tax only applies to withdraws and funds received from a fellow mobile money user. Wewole & Mokash are termed Banking services meaning for a moment you get the ultimate chance to dodge the 1% tax using your phone as it lonely awaits you on Withdraw or when you use the funds to Pay for goods or bills.

Bills & Financial services

Financial services, Banks withdrawals and deposits are the only services exempted from URA’s 1% tax. However, this doesn’t mean you escape tax when paying utility bills as your service provider also prepared a special bill payment fee ready to give the 1% transport to your utility provider. Contrary to the bills, when sending money from your phone to the bank or clearing a monthly SACCO/ Microfinance fee, the 1% tax doesn’t apply in that case. Henceforth, when paying your bills, the 1% tax is automatically applied after approving your transaction to a utility service provider.

Example:

Amount to clear Bill: 20,000/=
1% Tax : 200/=
Charges: 1600/=
TOTAL BILL COST: UGX 21,800