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Monday, July 9, 2018

TO TAX OR NOT TO TAX …

This week protests burnt the wires as everybody who was anybody, complained about the new taxes on social media and mobile money transactions.

It was interesting to me was that the loudest noise was made about the sh200 daily tax on social media and not the one percent tax charged every time you touched you screen to do a mobile money transaction.

Strange because there are about one million internet users in Uganda and about ten million mobile money accounts.

Clearly the mobile money users were feeling the pain. It was reported that in the first few days of the tax transactions collapsed to a fraction of their previous levels.

There was no evidence that social media activity had gone the same way, but then again the protesters had switched to the Virtual Private Networks (VPN) which bypassed the mobile network operators.

"How is it that such a relatively small number can make so much noise? Or were they actually? Isn’t it that I am also on social media that I felt the incessant fury of the chattering masses? The vast majority of mobile users were probably oblivious to this noise?..

It’s not worth my time to protest against the social media tax. I am more interested in the mobile money tax(es).

If we step back a bit from the forest.

According to the 2018/19 budget the government has earmarked sh32trillion to be spent on providing security, education, health, infrastructure and other public goods. This comes down to about sh800,000 for every one of the 40 million Ugandans.

I hope that number provided some pause for thought. 

That sh800,000 is for the whole year. Chances are that anyone reading this column by virtue of the fact that they can read English, shell out sh2000 for this paper or know someone who does, would not begin to even contemplate getting by on sh800,000 a year.

Food, rent, transport, school fees, power, water etc etc would consume that sum before the three months were done. And I am obviously being very conservative.

And we know government is struggling to provide.

Look at the state of Universal Primary Education (UPE), our public health system, our security and even our roads. I will be the first one to point to corruption as a key driver of these inefficiencies but even I wonder how much government can do, even if they spent everything as was planned. Not very much I fear.

Across the border in Kenya the government will spend the equivalent of sh1.6m on each Kenyan or double our own government’s outlay. Anyone who knows people in Kenya they make the same complaint about inadequate service delivery. From afar their corruption seems makes our own practitioners seem like they are in kindergarten, but you have to wonder about the amounts, even there.

The equivalent for little Botswana in the south is 3.2m.

"The figures suggest to me as a Ugandan that the government is spending way too little on me. It is even shocking when you see how much the government plans to spend on health, sh57,000, Education, sh78,000 and security sh53,000. All these figures are for the whole of the fiscal year 2018/19...

And how much does government plan to collect from every Uganda this financial year, on average? Sh400,000!!!

Now if you are Pay As You Earn (PAYE) payer like I, you must have done a double take at that figure. If I speak for myself, if my annual PAYE bill was sh400,000 you can charge me sh10,000 a day in social media tax and I would not care.

The point is that a small group of us – about a million workers out of a workforce of 11 million, are shouldering the burden of the government budget. No wonder nothing works and us the same workers who fork out the money to provide health, education and security still have to pay for the same services privately.

I and the other tax payers are the real victims of Uganda’s poor economy.

So some of us vote with our feet and leave this god forsaken land.

If we were to land in the Netherlands, the government would spend the princely sum of sh11m per person and we would get free education, health, credible security and all the other good things that come with a functioning government.

However my share of that government expenditure would be sh10.2 million in taxes or 92 percent of the Netherlands taxes come from domestic revenues. They have no donor countries to help them. They are the donors.

The point is clear if we want world class services at home like we see when we land at Schipol or Heathrow or John F Kennedy airports we have to pay up....

Which brings me to the mobile money tax.

The mobile money tax as designed and at the rate being asked is a disincentive to the whole payment ecosystem that has grown around it and by extension it’s doubtful whether the government shall get the taxes it planned for.

The logic is sound. As the finance ministry pointed out this week last year sh54trillion coursed through the mobile money networks but 70 percent of that money, the income which generated it was not registered at the URA’s data base. We know we are a largely informal economy so how better than to catch the untaxed monies than using mobile money?

The President on Wednesday evening clarified that the tax was not to be leveled on deposits to the system, effectively a digitisation of money, and that the rate should come down to 0.5 percent, this is great but still punitive when you levy it on two sides of the same transaction.

With the above being said government needs to walk the tight rope between extracting maximum tax and throttling the goose that lays the golden eggs.


"A comprehensive review of the mobile money tax is long overdue – a week into its implementation...

1 comment:

  1. Hello Paul. I strongly believe that taxes on mobile money was a brilliant way of expanding the tax base. With the current mood and disaffection, this mostly falls on dead ears. The problem is the taxation of two points. I hope this is fixed.

    ReplyDelete