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OPINION: There’s Need For Candid Discussion On Mobile Money Charges, Taxes

By Kiconco Katabaazi Patrick /Advocate-Public Policy Specialist

It is at this time of the year that the press and public domain gets busy with buzz about the budget and tax proposals.

According to section 13 (11a) of the Public Finance Management Act,2015 the Minister of Finance  is mandated  to present to Parliament bills necessary to implement the budget.

These bills include appropriation bills as well as tax bills that contain proposals on how government intends to raise domestic resources to implement the proposed budget.

Proposals for 2018/19 have generated unprecedented debate largely because of URA’s aggressive strategy of targeting more revenue sources but also due to the fact that the proposals seek to impose taxes on social media and mobile money transactions that affect a fairly large section of the population.

Through the Excise Duty (Amendment bill) 2018,Clause 6 , Government seeks to levy 15% excise duty on fees charged on money transfer, withdraw services  by operators licensed to provide communications or money transfers with exception of services provided by banks.

In addition, government proposes to levy 1% on of the value of transactions from receiving and withdrawing money.

Whereas the 1% excise duty proposal is new, the proposed 15% reflects a 50% increase in excise duty currently being implemented at 10%.


From all proposals presented, it is the 1%  Excise Duty on mobile money transactions that seems to have inspired Civil Society organizations (CSOs) led by the Civil Society Budget Advocacy Group (CSBAG) to wage national wide campaign against this move.

CSOs argue and rightly so, that such a tax will increase the cost of making transactions on mobile money platforms there by hurting financial deepening aspirations in general and growth of digital financial services in particular.

I strongly support this campaign on that basis.

Since the introduction of mobile money, access to finance by a common man in all corners of Uganda has been made possible but such gains are not sustainable if the cost of making such transactions remains excessively prohibitive.


If the intention is to support financial deepening and inclusion, I am of the view that we have not utilized this opportunity to open a wider discussion about the costs of sending and receiving money through mobile platforms in Uganda.

Even before the introduction of these tax proposals, I have always found mobile money charges to be manifestly excessive and not based on any verifiable process and the move to solve the 1% levy challenge will be like quick fix but will leave a bigger problem.


Interestingly, we are mute about proposed 15% excise duty on fees for money transfer (both withdraw and sending) which ultimately will be transferred to clients on top of the 1% already talked about.

It is important to note that the 15% doesn’t affect Banking institutions because these are already facilitating excise duty of 10% collection on all mobile money transactional charges processed by the Banking sector.

This makes the whole story of financial deepening and inclusion very complex because where as the Excise Duty is premised on the charges made by the Banks, the tax is transferred to the consumer and I don’t expect the 15 % excise duty on mobile money/money transfers charges to work differently.


To begin with, according to MTN rates Effective 22nd December 2017 available on the company website, the lowest costs for sending mobile money from one account to the other registered one, non registered users and withdraw charges are Shs250, Shs830 and Shs330 respectively for the lowest band (Shs500 – Shs2,500).

If we considered the upper limit, it means for Shs2,500 a customer pays 10%, 33% and 13% to send money to a registered user, non registered user and to withdraw respectively.

This situation is no different for customers in the highest band (Shs4,000,001-Shs7,000,000) where sending money to non registered user costs Shs55,000, while withdrawing any amount in that band costs Shs49,500 in charges.

For Airtel, the lowest band (Shs500-Shs2,500) sending to registered users, other networks users and withdraw attract charges of Shs250, Shs1000 and Shs330 respectively while for the highest band (Shs4,000,000-Shs5,000,000), Shs70,500 for sending money to other networks and Shs49,500.


It is imperative to note  that charges  from the two leading  telecom companies are not significantly different,  but it is very true that in all cases, the cost of transaction on mobile money is very high which bring in the question, who sets these charges?

What are the drivers is the bed to another basis? In my limited knowledge of mobile money pricing I don’t know how different is the data message sending Shs1, 000 compared to sending Shs1,000,000.


Looking at the proposed taxes, the already exorbitant charges will wipe out the money meant to be transferred significantly. For example, sending Shs10, 000 to your grandmother in the village will attract a cost of Shs1,000; the proposed 1% on all mobile money transactions will mean that on top of Shs1,000,  another Shs100 will be charged plus 15% of the charges amounting to Shs150.

As soon as money hits her phone, the Shs10, 000 transaction would have cost Shs1250, leaving her with Shs8,750.

When she withdraws, she will be charged fees of about Shs700 and with 1% (97.5) plus 15% of withdraw charges which is Shs105, meaning that she will get Shs7,847.5 which is about 78.4% of value of the money actually sent.


The situation will be worse if one used mobile money wallets being operated by banks where a client withdraws money from the account to the phone (Mobile Money account) to send using the above process.

This is true considering the fact that average cost of using banks to transfer money attracts average push charges of Shs5,000,  with Shs1,000 and Shs19,500  being  the lowest and highest respectively.

This of course will come along with existing 10% excise duty on these charges that is transferred to the consumers.


While I understand that Government is under pressure to raise domestic resources,   the taxes being proposed have an element of double taxation but also make the already expensive mobile money transactions more expensive.

In my view, focusing on 1% Excise duty on mobile money charges alone is good but not sufficient to deal with the issue of excessive costs if our argument about financial deepening and inclusion is relevant.

The cost of these transactions is slated to be the most expensive money transfer costs in the world which certainly is counterproductive to the forward and backward linkages of growth of digital financial services.


We therefore need a compressive discussion on mobile money charges by telecoms, banks and then these proposed taxes if we are to have sustainable financial Deeping strategies.

Else, I see us helping banks and telecoms make kills as customers suffer with these burgeoning costs.

URA is also encouraged to strengthen capacity to audit these IT systems to ensure that all these taxes collected by banks and telecom companies are remitted in full.

There are a lot of potential tax opportunities in transfer pricing mechanisms, double taxation agreements, tax incentives and URA- Local Government linkages which in my view should be the focus of government first and foremost.











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