Uganda to tax mobile money transfers Published duration 14 June 2013

image copyright AFP image caption Ugandans often use mobiles to transfer money to those without bank accounts

Uganda is to impose a 10% tax on cash transfers by mobile phones and other money transfer operators.

International remittances from Ugandans living abroad are also affected.

Finance Minister Maria Kiwanuka said she also planned to raise $16.5m (£10.6m) by imposing a levy on incoming international phone calls.

Ms Kiwanuka had to come up with ways to plug a $214m hole in the annual budget after donors cut aid over accusations of corruption.

The BBC's Catherine Byaruhanga in the capital, Kampala, says there has been criticism that the budget - presented to parliament on Thursday - will hit poorer Ugandans hardest.

Ms Kiwanuka told MPs that in the last year $767m worth of remittances had been received from Ugandans in the diaspora.

According to Uganda's private Daily Monitor newspaper, the new mobile money transfer tax could affect the 8.9 million customers using six mobile phone networks in Uganda.

The government hopes to raise $12m annually from the tax, it reports.

Mobile money transfers are extremely common in Uganda as many people, especially in rural areas, do not have bank accounts.

Transfers are used to send money to relatives and even settle some bills.

"It's very unfortunate that Ugandans are being squeezed both ways," Simon Mpagi, a mobile phone money transfer agent, told the Reuters news agency from his retail shop in Kampala.

"They steal our taxes and donor money... leaving public services to near-collapse and now when donors get angry and cut them off, then they come to us and punish us again by raising taxes to grab even the little income we struggle to make."

Phiona Wall, communications manager at mobile phone company Airtel Uganda, said she felt there were contradictions in the budget.

"In telecom we are trying to increase affordability and things like mobile money transfer revolutionised money transaction so when you increase tax, there is a contradiction," she told Uganda's state-owned New Vision newspaper.

David Holliday, managing director of Uganda Telecom, said the new tax would mean a significant increase in the cost of the service.

"Mobile money has become part of people's everyday lives because they don't need to carry cash. Even those who were formally unbanked have mobile money accounts with a service provider of their choice because it's cheap," the Daily Monitor quoted him as saying.

Ms Kiwanuka said the aim of the budget was to target those who avoid or do not pay taxes and set targets for the revenue authority to make sure taxes are actually collected.

"All the tax proposals that have been mentioned add up to about 3% of existing taxes and they're still subject to parliamentary approval," she told the BBC.

"That percentage shows you that really the budget is not about new taxes, it's about… taxes already due be paid. Collecting the uncollected."

The UK, Denmark, Ireland and Norway have all suspended some aid to Uganda following allegations that millions of dollars had been transferred from Prime Minister Amama Mbabazi's office into private accounts.

Mr Mbabazi has acknowledged that money has been stolen from his office, but denies any involvement.