The Ministry of Finance, Planning and Economic Development has proposed to impose a 15% tax levy on all bank transactions undertaking Islamic Banking in Uganda.
This is part of the efforts by Government to implement Islamic Banking in Uganda.
The proposed amendment is contained in the Excise Duty Amendment Bill NO.2 that is slated to be tabled by the Minister of Finance during today’s plenary sitting.
“Ledger fees, ATM fees, withdraw fees, periodic charges and other transactions and non-transaction charges, excluding loans or the equivalent under Islamic Banking related charges periodically charged by a financial institution or micro finance deposit-taking institution. 15% of fees charges. Excise Duty Amendment Bill No.2 2023,” read in part the bill.
Islamic banking transactions are guided by morals and value system as derived from Sharia Law and these demand transparency and full disclosure between parties to a transaction, good faith in conduct by the parties to a transaction and do no harm to a wider society.
Any gains arising from the trading are shared between the party providing the capital and the one borrowing the money and providing the transaction.
If passed into law, Uganda will join other African countries that have adopted Islamic banking but are non-Islamic states including; South Africa, Senegal, Botswana, Zambia, Eritrea, Mozambique, Kenya, Tanzania, and Rwanda.
It should be recalled that in the 7th Parliament, lawmakers passed the Financial Institutions amendment Bill, which introduced Islamic banking that is consistent with Islamic Shari’ah (law) in Uganda but calls from the Muslim community to Government to operationalize have always fallen on death ears and it wasn’t until recently that Minister of Finance Matia Kasaija announced the start of this form of banking in Uganda.
The law was subject to the establishment of a Central Shari’ah Advisory Board in the Central Bank to regulate banks providing Islamic banking products.
Now, the Ministry of Finance is set to table a set of tax bills that will operationalize Islamic Banking among which include; The Excise Duty Amendment Bill NO.2 2023, The Stamp Duty Amendment Bill 2023, The Value Added Tax Amendment Bill NO.2 2023 and The Income Tax Amendment Bill (No.2) 2023.
