Mobile money agents in Luweero district have, in defiance launched a master plan under which they will avoid paying the new tax imposed by government at the start of FY 2018/19.
The more than 100 agents say, their tax avoidance plan will hurt the telecommunication companies, that they accuse of failing to fight for their customers and clients' rights as well as government that they say, will not be getting the much anticipated taxes.
Effective July 1, 2018 government imposed a one per cent taxation on all mobile money transactions including on deposits, sending, receiving and withdrawing. The Excise Duty (Amendment) Act passed by parliament in May this year also increased the excise duty on mobile money from 10 to 15 per cent. In addition to other new taxes, government hopes to collect between Shs 400 billion and Shs 1.4 trillion annually.
Now, the agents in Luweero say, unless the new taxes on mobile money are withdrawn, they will carry out mobile money transactions between themselves in a way that will see the telecoms lose out on revenue and government lose out on taxes.
The agents describe the tax as unfair, saying it amounts to double taxation and will cripple the economy. Dan Nsubuga, the director Mamba Connections Limited in Wobulenzi town, says they intend to conduct agent to agent transfers to eliminate the exorbitant charges.
He explains that the telecoms don't benefit from such transaction since they are free of any charge and therefore deny government taxes.
"We can do transactions between agents, we know very well how to do that. Those transactions are not costed, so what we shall do, we shall negotiate between agents using the old costs. The old costs, for us, we shall know how to share them and when we follow that route, it’s even more profitable compared to the 'normal' way of doing transactions."
"Telecom companies will lose the revenue, they will lose the money they have been getting from mobile money. Two, government will not get this tax. So, either they shut down the whole system, and we don’t care even if they shut down the system for a whole week, as long as they come back with a normal way of doing business, not this theft, not this robbery," warned Nsubuga.
Sam Sserunjogi of Sserunjogi Investments Limited in Busula trading center, said their strategy doesn't contradict any laws, saying what they aim is to fight multiple taxation. He said beating paying the tax will only be applicable to people depositing less than Shs 300,000. He added that as agents, they will be advising their customers as well how they can avoid paying the new tax.
Following a public outcry, cabinet has since directed the telecoms to stop levying tax on deposits on personal mobile money accounts.
Despite this, Sserunjogi insists the entire tax regime must go. He said within just one week, government and telecom companies will realise a significant drop in mobile transactions due to the new prohibitive tax.
Godwin Kidima of Kidima Investments Limited in Luweero says they have nothing to do but to use all possible ways to beat paying taxes so as to stay in business. He says many people have already abandoned mobile money citing the exorbitant taxes and resorted to traditional ways of sending money.
He says many people in Luweero have been sending and receiving money from Kampala city through mobile money but the new taxes now make mobile money more costly than the transport fares.
"Government we warn you, within a maximum of two days - Wednesday [and] Thursday you must come up and address this matter. Failure to do so, we shall come back and inform Ugandans about ‘Plan B’ and this ‘Plan B’ will automatically kick out the telecom companies from business as well as the government that will be denied this tax." said Kidima.
Adding; "And quote us right, we’re not fighting taxation, we appreciate the government needs this tax to work on a number of projects, but the truth is, outside all this we need to have a genuine tax policy not this quadruple taxation. A transaction of Shs 5 million cannot go at an expenditure of Shs 251,500. There is no business that can attract that much as profit within a maximum of two minutes [of transaction] that this government has subjected us to."
Hadijjah Kayondo of Yesu Mugagga Investments says the mobile money tax was introduced in bad faith, adding that it will drive many out of business and fuel crime. According to Kayondo, mobile money has been employing many young girls, who are likely to end up in prostitution should the business be affected.
The vendors want parliament to reconvene under a special sitting and revise the tax immediately to spur development. Telecoms have not yet reacted to the campaign. However, last year telecoms directed agents to make deposits directly on the client's mobile money account after noticing dwindling returns. The companies also reduced the commissions for agents.