Government to Slap New Tax on Cash Withdrawal Channels

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The government is considering slapping a 0.5% tax on all cash withdrawals channels in the country. This has attracted mixed reactions from members of the public.

In a February 9, 2020 letter to the Bank of Uganda Governor Emmanuel Tumusiime Mutebile, Deputy Secretary to the Treasury Patrick Ocailap requested for all data withdrawal channel categories for assessment and review.

“…it was proposed that we explore taxation of cash withdrawals in commercial banks. Currently, mobile money withdrawals are subjected to a 0.5% excise duty but on counter, agency and ATM withdrawals in commercial banks are not subjected to the same tax,” Ocailap stated in the letter. 

“We, therefore, wish to seek your opinion on the proposal and also request you to avail us with the data on all categories of withdrawals for further review and determination. We require this data for the past three years starting from the financial year 2017/18,” he added.
Ocailap also urged that this would encourage cashless transactions, promote electronic commerce, improve tax compliance and raise revenue. 

The Government imposed a tax on all mobile transactions withdrawals in FY2018/19, a move that was viewed as targeting lower income earners. Many low income earners resorted to dealing in cash to avoid the tax.

Some experts described the tax as being discriminatory. On average mobile money transactions on withdrawal are about sh40,000. Suggestion from civil society organizations to set up a threshold below which the 0.5% should not apply fell on deaf ears.

This comes at a time when government is experiencing expenditure pressures. Last year, the government suspended Christmas and End of year activities citing weak economy.

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“This is to direct you not to organise Christmas and end of year parties, as well as not engage in printing of Christmas Cards, Diaries, Calenders, buying of Christmas gifts and hampers and anything else related to such expenditures.” Ocailap said in a statement.

Social media reactions

Mijumbi Simon: “The people advising the president are doing a good Job putting the government on the edge. Thugery in broad daylight is a sign of a collapsing government.”

Kijinjikitile Ngwale: “This government is soon taxing our private parts!”

Kacabor Savior: “Let them even Tax us for being Ugandans after all majority need to first be squeezed to wall so that they feel the need to remove this shithole of a government.”

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