Finance rejects sh3000 tax on mobile phone lines

By Mary Karugaba

The Ministry of Finance has rejected a proposal by MPs to impose a user fee of sh3000 on every mobile phone line per year. The amount will also depend on the number of telephone lines one has.

The proposal by MPs on the Parliamentary Finance Committee is intended to streamline tax expenditure, tax policy and administration to raise tax efforts.

The proposal was forwarded to the Ministry of Finance for consideration, come next financial year.

“Most donors have indicated that they are pulling out of the budget support next financial year. So are trying to find possible means of raising our sources of revenues so that the population is not affected in terms of service delivery,” MP Lilly Adong argued.

Without proposing a figure, the MPs also called for a higher levy on night clubs.

But State Minister of Finance Fred Omach rejected the proposal arguing that there were already taxes on phones.

Omach argued that any additional tax would make the service less competitive and more costly.

“They are already a number of charges on mobile phones. The proposal to impose an additional user fee of sh3000 will make the service more costly and less competitive,” he said.

It’s becoming almost a tradition that every financial year, there’s a new tax introduced on mobile phones.

Currently, Ugandan mobile phone users pay a VAT of 18% and excise duty of 12 %. In addition, VAT is levied on handsets and exercise duty of $9 cents on international incoming calls.

The minister of Finance Maria Kiwanuka announced last month during a Caucus meeting at Entebbe that Uganda will be funding the coming year's budget largely from domestic revenue sources by 82 %.

This is in sharp contrast from last year when as much as 25 per-cent of the budget was donor funded. The aid cut follows donors’ concerns following theft of public funds.

Finance commissioner for Tax, Moses Kagwa told Newvision that although the ministry has looked at the proposal, it is not applicable. He doubted whether the MPs first did a research on the impact of the charge on consumers.

Adding that, “I think the proposal was not properly researched to ascertain its impact on consumers.”

Some mobile phone companies could not comment as their spokespersons were either out of the country or not available on weekends.