In it’s plan to increase revenue collection on all fronts, the government of Uganda is brewing a plan to consider taxing money withdrawals from commercial banks according to news reaching our desk.
“Following our budget consultative meeting held on February 5th, 2021, at this ministry [of Finance] attended by officials from Uganda Communications Commission, Ugandan Revenue Authority, Telecom Operators and Bank of Uganda, it was proposed that we explore taxation of cash withdrawals, from commercial banks,” the February 9th letter written by the deputy secretary to the treasury, Patrick Ocailip, to the Governor, Bank of Uganda, read in part.
The official’s reasoning for this proposal is that since mobile money withdrawals are subject to 0.5% excise duty, agency banking and ATM withdrawals in commercial banks should also follow suit.
Furthermore, the letter seeks for the Governor’s opinion on the proposal and requests his office to avail the Ministry of Finance, Planning & Economic Development with data on all categories of withdrawals for further review and determination.
The government dreams that should this proposal be taken up, cashless transactions will be encouraged in an economy where 75% of payments are still made through cash according to the Bank of Uganda which is on a drive to transform Uganda into a cashless economy. Other pros of this move include promotion of e-commerce and improvement of tax compliance hence raising revenue.
The government, however, has an uphill task in convincing Ugandans to accept this proposal as they have already taken their discontentment to the various social media platforms since this letter leaked on Wednesday night. It should be remembered that the government adopted the infamous mobile money tax, and Over The Top (OTT) tax in 2018 despite cries and demonstrations by Ugandans and the opposition.
