House rejects levy on digital cash withdrawals

Parliament has rejected the proposal to expand Excise duty to cover digital financial services.

Despite the Finance Committee's recommendation to include Excise duty on withdrawals made through financial technology services, Parliament rejected the proposed amendment to the principal act in its sitting on Thursday, 04 May 2023.

The Ministry of Finance, Planning and Economic Development proposed that the application on Excise duty be expanded to cover financial services as envisaged under the National Payment Systems Act 2022 at a rate of 0.5 per cent of the value of the transaction.

This meant that for every withdrawal of cash through financial technology services provided through digital or online technologies, one would incur a 0.5 per cent levy.

However, led by Speaker Anita Among, the House argued that the move would be detrimental to the growth of the digital financial services industry and would be an unnecessary burden on consumers.

Among questioned the Deputy Chairperson of the Committee, Hon. Jane Pacutho Avur on whether they had consulted with stakeholders in the banking sector on the proposal to which she said, ‘no’.

“Did you interact with the stakeholders, and which stakeholders did you interact with? That is a tax on transactions, meaning that if you went to bank money you are taxed. Did you interact with the regulator, the Bankers Association?

The State Minister of Finance and Planning, Hon. Amos Lugoloobi and the Deputy Committee Chairperson conceded to the deletion of the proposal.

Meanwhile, the House maintained Excise Duty on Opaque Beer and introduced an ad valorem Rate on drinking water.

The committee recommended maintaining excise duty on opaque beer, while reducing excise duty on alcoholic or non-alcoholic beverages locally produced, excluding kombucha, to 12 per cent or Shs250 per litre.

The House also adopted the committee's recommendation introducing an ad valorem rate of 10 per cent or shs75 per litre on mineral water, bottled water and other drinking water to create uniformity for the industry.

Sheema Municipality Member of Parliament, Hon. Dickson Kateshumbwa said that the proposal will not increase the price of water but will instead help the government in fighting manufacturers who under declare.

AUDIO Kateshumbwa

“If the bottle is at Shs1000, 10 per cent is Shs100.  So, if someone is under declaring, we are saying that it will either be Shs75 or 10 per cent, whichever is higher. We should support it to create a level playing field in the market,” he said.

Kateshumbwa’s submission followed concerns from Hon. Muwanga Kivumbi (NUP, Butambala County) that the levy would deprive many Ugandans of mineral water and force them into drinking unclean water.

AUDIO Muwanga Kivumbi

Pacutho stated that the taxes would be collected and the funds from it would go towards providing drinking water to Ugandans.

The House also adopted the proposal which would provide incentives for both domestic and foreign investors looking to invest in the construction materials sector.

The amendment aims to empower manufacturers with an investment capital of US$50 million or more and encourages foreign investors with a capital investment of up to US$35 million to participate in the sector as well.