Telecom companies have seen nearly three-quarters of their transactions cease after the government’s resolution to levy a 1% Excise Duty on all mobile money transactions.
According to MTN CEO Wim Vanhelleputte, the tax had in just two weeks inflicted a decline of about 63% as users cut down on mobile money transactions through the telecom.
“We have suffered obviously since the tax took effect. We welcome every attempt by the players to review the taxes. We had more than 8 million transactions but that number has reduced to 3 million in since July 1 when the tax took effect,” said Mr Vanhelleputte.
The CEO who was speaking at the closure of MTN’s MoMo Nyabo promo said the government had not committed to halving the tax in policy and as thus, the telecoms were still levying the tax as 1% not 0.5% as directed by the president.
“The only communication we have from the Uganda Revenue Authority (URA) was that deposit transactions were duty free. We implemented that and we are waiting on Parliament to pass the 0.5% amendment,” Vanhelleputte noted.
When reached on phone for a comment, Airtel Uganda’s Managing Director VG Somasekhar said that he was “relieved and pleased” with the Cabinet resolution admitting that the telecom has been suffering from a revenue drop as a result of reduced mobile money transactions.
Experts weigh in on the debate
Cabinet’s resolution, however, has been met with mix emotions from experts and business players with some saying that the decision will ease life for ordinary Ugandans while others argue that it is not enough.
Julius Mukunda, the Executive Director of the Civil Society Budget Advocacy Group (CSBAG) said that in as much as the tax revision is welcome; it is going to stifle innovation and increase the cost of doing business especially within the informal sector.
Mukunda who has engaged stakeholders extensively on the matter further argued that since the biggest mobile money users are the poor who transact meagre amounts, the government will severely hurt the only groups of the population – youth and women – they are investing heavily in empowering.
“The government projects like Operation Wealth Creation, Youth Fund and others are empowering these rural youth and women to be productive. These are the same people they are taxing. It is ironic,” he said.
Prof. Augustus Nuwagaba, the telecoms consultant that had earlier advised the government to only taxed mobile money withdrawals but with no success said that he was happy that his plea was finally heard.
“It is a big challenge when you are dealing with a government that does not understand economics. If in only two weeks, telecom companies, businesses are crying of losses, imagine if the tax had lasted a year, the results would have been disastrous,” he said.
Nuwagaba advised the government to always make extensive consultations with the affected parties before bulking them with boardroom policies that have no practical solutions.
“You can imagine that a Parliament of over 400 members had passed such a tax. One wonders if they were thinking about the people they represent,” Nuwagaba noted.
Ever since the tax on Over The Top (OTT) was implemented, telecom companies have a 75% fall in social media use, 50% reduction in capacity use as VPN mobile apps downloads shot up by 1500%.
The above figures were however not enough to persuade Cabinet to scrap the tax. Users will continue to pay Shs200 daily to access social media platforms.
However, the government has entered talks with the telecoms and Uganda Revenue Authority (URA) to find ways of charging the tax via airtime.
Silver Kayondo, a city lawyer who together with other petitioners dragged the government to the Constitutional Court told Matooke Republic that they were proceeding with the case whose hearing is set for July 23 despite recent developments.
“We shall go ahead with the lawsuit against the government. Our objection is not on the payment options, but rather a double taxation of the end-user and negative effects of the tax on innovation and startups,” he said.