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Mobile money users drop in huge numbers over taxes as masses cry out

KAMPALA – The mobile money tax levied by the government has proved to be detrimental to the sector as citizens have labeled it not only discriminative but expensive as well.

In the few months following the introduction of the levy in July 2018, there was a noted decline in the number of total revenues collected, as well as mobile money transactions.

According to a new report by Twaweza in a research brief titled Banking, mobile money and taxes: Ugandans’ experiences of and opinions on mobile money, at least 79 percent of citizens say that they think mobile money services are too expensive.

This is compared to 3 out of 10 about 32 percent who said the same one year before.

The information is based on data from Sauti za Wananchi, Africa’s first nationally representative high-frequency mobile phone survey with the findings based on data collected from 1,905 respondents across Uganda in November 2018.

The report has shown taxation could undermine economic growth in Uganda, besides risking job opportunities and operators’ revenues.

Telecom companies also noted the tax increase led to a decrease in mobile money use, potentially impacting digital financial inclusion.

In a series of tweets recently, the Uganda Communications Commission noted the value of mobile money transactions fell byUGX4.5 trillion.

“The decline in the amount of business could partly be explained by the introduction of mobile money tax,” the regulator said.

“When asked about the new tax, 4 out of 10 citizens (41%) are aware of it. Among these, over half 57 percent say they have reduced their transactions since the introduction of the tax while fewer 37 percent say their transaction volume is unchanged. In addition, 7 out of 10 citizens who are aware of the tax (71%) disagree with it,” a report from Twaweza notes.

Mobile money according to a new report seems to particularly benefit women and young people, evening out the disparities in these important groups’ access to financial services.

“Men (23%) are almost twice as likely as women (11%) to have a bank account while women (70%) and men (76%) are almost equally likely to have mobile money accounts. Similarly, young Ugandans age 18 to 24 are much less likely to have a bank account than other age groups (10% versus 20%) but this group are just as likely to have mobile money accounts (74%) as all other age groups except those over 55 who are less likely to have mobile money accounts,” the report adds.

Whereas the government’s strategy is to extend the tax revenue, the report has slammed it for sanctioning a sector that has the potential to drive growth.

The NGO adds that increased fees for poor users will dampen their consumption, limit financial inclusion, and in turn, reduce operators’ revenues and among others.

Marie Nanyanzi of Sauti za Wananchi at Twaweza noted that these data tell an important story of how mobile money has boosted financial inclusion particularly among groups that struggle to access formal financial services such as bank accounts.

“But it seems the consequences of the tax on these services are now beginning to spread: people are now much more likely to find mobile money services too expensive, say they have reduced their transactions as a result of the tax and overall many disagree with the tax.,” said while launching the report at Hotel Africana, in Kampala.

She added that; “Although widening the tax base is an important part of Uganda’s progress, the government must ensure careful calculations are done to weigh up the tax collected against the potential for excluding people, particularly more vulnerable groups, as a result of the price changes.”

Mobile money, however, according to the report does less to address some of the other inequalities that arise in access to bank accounts between the formally and casually employed, the poor and the wealthy, and the educated and the uneducated.

The report notices that for bank accounts and mobile money accounts, the formally employed, the wealthy and the educated are more likely to have access.

“In addition,” she continued, “there is an indication that citizens are borrowing to meet social service expenses like unexpected medical costs. This poses a risk of citizens becoming indebted for items that are not targeted toward improving their livelihoods meaning that the debt will be particularly hard to service. At the same time, this access to credit may provide a lifeline for the poor and vulnerable to at least be able to meet these essential expenses while planning for repayment.

However, the best option would be to ensure that social services are affordable and accessible to all Ugandans so that no one has to borrow to access them. The government should consider increasing or redirecting budgetary allocations to sectors like health and education to lessen the burden on the citizens.”

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