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Ugandan banks opposed to proposed withdrawal tax

Customers inside a banking hall

Customers inside a banking hall

Ugandan banks through their umbrella body, Uganda Bankers Association (UBA) is set to petition the central bank to block the proposed taxation of cash withdrawals from banks.

The proposal has drawn condemnation across sections of the public after the ministry of Finance Planning and Economic Development wrote to governor Bank of Uganda seeking views on the matter. UBA says it was wrong for the ministry of Finance not to involve the bankers since they are the ones who would implement the decision. 

Instead, the ministry chose to talk to the regulator, the Bank of Uganda. Interestingly, Uganda Communications Commission (UCC) as the regulator of the telecommunications sector was invited for the discussions along with the telecoms, which was not the case with the banking industry.

The meeting was also attended by the Uganda Revenue Authority (URA). The letter to the governor, among other things, wants the central bank to avail data on the types of withdrawals that are made over the counter and via automated teller machines (ATM) for purposes of determining the tax.

The UBA says the services are already charged several taxes that amount to 15 per cent and the burden of these is all largely transferred to the clients, making banking costly for the consumer. UBA executive director Wilbroad Owuor says they will make an official reaction, which includes writing to the Bank of Uganda about their view on the proposal, especially because they were not consulted.

The current taxes are charged on withdraws irrespective of the amount. For example, if a bank charges a customer Shs 1,000 for withdrawing cash, the government takes a total tax amount of Shs 150 making the total cost to the customer Shs 1,150.

This time around, the proposed tax will be charged on the amount the customer will be withdrawing and could vary with the amount being withdrawn. While the ministry of Finance says the move will encourage cashless transactions like mobile and electronic banking, the proposal has drawn threats from sections of the banking public to withdraw all their savings and find other alternative means of keeping it.  

“Mobile money withdrawals are subject to 0.5% excise duty but on the counter, agents and ATM withdrawals are not subjected to the same kind of tax”, the minister’s letter signed by the acting secretary to the treasury, Patrick Ochailap, adding that this would encourage cashless transactions, promote e-commerce, and improve tax compliance in addition to raising revenue.

Finance minister Matia Kasaija denied knowledge of the plans to introduce such a tax.  

Comments   

+2 #1 Apollo Ekelot 2021-02-14 13:48
The banks must fight and win this war otherwise, we will keep our money out of their banks and they will be the losers!

Who do these fellows take us for? The money we keep in the banks is already taxed, when we spend we get taxed, when we transfer we get taxed when we keep in the bank we pay levies on a monthly basis. Not fair. Kwa ukweli hatuta kubali ku finywa ne serikali bandia. Punda ime choka!
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+1 #2 kabayekka 2021-02-14 14:17
Indeed in failing to build up the modern infrastructure that is working well in developed countries, bankers and government officials are bent on charging the citizens of this country left, right and center on any petty financial transaction.

Soon it will be tax and VAT on fares where mass public transport infrastructure has failed.
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+2 #3 Akao 2021-02-14 17:57
They are worried the donors are going to dwindle, only china loan will be readily available.

With hundreds of pwople to bribe, close to thousands of mps/rdcs to pay, the dictator have to look for another means of getting revenue.

Teachers, nurses, doctors should forget about vetting paid going foward as there is not going to be enough money to go around. I hear 8.3 million is middle class
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+1 #4 WADADA rogers 2021-02-14 23:36
Okay, this is how it plays out. Your employer pays your salary at the end of the month and after taking off other taxes at source, they also take off NSSF and finally the banks take off their loans before depositing the money to your account.

When you with draw the money using your phone to your mobile money account, you are charged and again when you take it your phone you are charged again, thats what we call double taxation and its the customer who bears the entire burden. Talk of a plan to introduce a cashless economy .
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+1 #5 kabayekka 2021-02-16 07:47
Wadada rogers you have explained better to the normal people of this country.

It certainly seems for the African bankers or their Governors that they are bent on making sure that Africans live in a modern society where by they must not touch or own any cash paper money at all. And if they do so, they must be charged or given a cash fine to pay up!
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+1 #6 kabayekka 2021-02-17 04:23
Therefore as 2+2 is 4, a cashless economic society only needs oxygen that you must not pay any money at all as you take it in and take it out.
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