The Uganda Bankers Association (UBA), is petitioning Bank of Uganda to block the proposed taxation of cash withdrawals from commercial banks.
On February 9, the acting Permanent Secretary at the Ministry of Finance, Planning and Economic Development, Patrick Ocailap wrote to the Governor, Bank of Uganda, Emmanuel Tumusiime Mutebile, asking for the central bank’s opinion on a proposal to cash withdrawals from commercial banks.
The proposal, according to Ocailap’s letter is premised on the fact that mobile money withdrawals attract a 0.5 percent excise duty yet on the counter, agent banking and automated teller machines (ATM) withdrawals are not subject to any tax.
The proposal has drawn condemnation across sections of the public prompting the bankers’ association write protest the move which it says was wrong for the Ministry of Finance not to involve the bankers since they were the ones who would implement the decision. Instead, the ministry chose to talk to the regulator, the Bank of Uganda.
Interestingly, the Uganda Communications Commission as the regulator of the telecommunications sector was invited for the discussions along with the telecoms at the introduction of the mobile money tax which was not the case with the banking industry.
The letter to the governor, among other things, wants the bank to avail data on the types of withdrawals that are made over the counter and via ATM for purposes of determining the tax.
The UBA says the services are already charged several taxes that amount to 15 percent and the burden of these is all largely transferred to the clients, making banking costly for the consumer.
The bankers’ association executive director Wilbroad Owuor says they will make an official reaction, which includes writing to the BOU about their view on the proposal, especially because they were not consulted.
The current taxes are charged on the cost of withdraws. 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the proposed tax will be charged on the amount the customer will be withdrawing and could vary with the amount being withdrawn.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 said that the move will encourage cashless transactions like mobile and electronic banking, the statement has drawn threats from sections of the banking public to withdraw all their savings and find other alternative means of keeping it.
Ochailap stated that the proposed tax would encourage cashless transactions, promote e-commerce, and improve tax compliance in addition to raising revenue.
Minister Matia Kasaija denied knowledge of the plans to introduce such a tax.