CSOs Call on Government to Drop the Proposed Taxation of Cash Withdrawals from Commercial Banks.
On 14th February 2021, Civil Society Organisations (CSOs) under the auspices of the Tax Justice Alliance Uganda including SEATINI Uganda, Oxfam Uganda, Foods Rights Alliance , Civil Society Budget Advocacy Group together with Federation of Small and Medium-sized Enterprises – Uganda held a press conference to voice CSO concerns on the proposal by the Ministry of Finance, Planning and Economic Development (MoFPED) to levy a 0.5% Excise Duty on cash withdrawals (including on the counter, agency banking and ATM) from commercial banks starting FY2021/22.
The proposal to tax cash withdrawals was reached recently in a budget consultative meeting between the Ministry of Finance and other stakeholders such as the Uganda Revenue Authority (URA), Uganda Communications Commission (UCC), telecom operators and Bank of Uganda (BoU).
While reading the CSO Statement on the Proposed Taxation of Cash Withdrawals from Commercial Banks, Jane Nalunga, SEATINI Uganda Executive Director noted that the proposed taxation of cash withdrawals is likely to deepen the tax burden instead of broadening the tax base because in most cases money banked is already taxed i.e. Pay As You Earn (PAYE).
“We acknowledge the fact that it is critical for the government to raise revenue to finance public goods and services but it should not burden the already burdened tax payers,’’ she said.
Sophie Nampewo, a Budget Policy Specialist at CSBAG explained that the move is double taxation, noting that many ‘‘would-be’’ taxpayers will be discouraged from using banking services. She also added that the move is likely to subject individuals whose incomes are already taxed to double taxation and therefore, the tax proposal is already unfair.
According to John Walugembe, the FSME – Uganda Executive Director, noted that the move is likely to increase operational costs for many businesses which might in turn discourage people from using banking services. The present banking culture coupled with the weak infrastructure are not supportive of this move.
Agnes Kirabo, the Executive Director at FRA – Uganda on the other hand argued that imposing the 0.5% additional tax will only further constrain banks to the extent of laying off more Ugandans from jobs because the e-banking, which the government claims to be seeking to expand, naturally shrinks job opportunities for Ugandans.
Joseph Olwenyi, the Coordinator, Financing for Development at Oxfam Uganda reiterated that the proposal will not achieve intended objectives but will discourage people from banking and cause far reaching negative implications thus constraining financial inclusion.
“Government should therefore venture into avenues that promote financial inclusion in the country and also raise revenue while ensuring fairness, equity and inclusiveness,’’ he added.
As a way forward, Civil Society Organisations shared various proposals which government can consider towards generating the much needed revenue but at the same time put in place fair and equitable tax systems and measures.
