MinBane

I write what I like.

Mobile Money Tax shortfall: People change behaviour after levying an unfair tax

Levy on mobile money contributed a deficit of UGX 30.48 billion which can be explained by the fact that high value clients withdraw their funds from agency banking e.g MTN has had a drop of 36 percent in MM transaction values since the introduction of the levy on mobile money” (Uganda Revenue Authority, 06.02.2020).

There is also reported that it has been a 36% drop in Mobile Money Transactions since the enaction of the Exercise Duty in 2018. That means, the added tax on the MM transactions are backfiring. The State isn’t adding revenue, but ensuring that people are finding other ways of moving their money.

This is not shocking, that people change behaviour, when the state makes it more expensive. As the people used these services to send each other money by convenience. Now, one third of the transactions are gone. Meaning, the ones that can change their ways has done that.

The losers are not only the Telecoms, but also the state. As the shortfall of taxes got to be covered elsewhere. As the state had put this into the budgets to cover other state works. This means the targets for domestic revenue wasn’t considering the implications of doing it. As, there wouldn’t be an natural reaction to the consequences to the new taxes.

Instead of increasing the tax base, they are making it smaller and not able to find measures that makes sense. The state has clearly done this without due diligence, neither also configured the stats and the possible behaviour of the public. As their ways gotten more taxed and not considering that they would stop, if they found it to expensive or unreasonable.

The MM tax and the OTT taxes was measures made to tax the digital market-space in the Republic. However, they have both been flawed and also not met their targets, because the public found other ways of doing things.

The ironies about the MM saga is that before the tax, the business of MM was growing. A natural growth and having more transactions every year. Now, that they levied the tax its has a big fall. That is a result of the MM Tax and the public is not having it. Peace.

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