Banks engage government over tax on all cash withdrawals

By Joseph Mazige

Kampala: Uganda Bankers’ Association is in engagement with the Ministry of Finance, Planning and Economic Development and Parliament to abandon the introduction of tax on all cash withdraws.

The Government plans to introduce a 0.5% tax on all cash withdrawals transacted on various channels including ATM, agency banking and over-the-counter transactions.

“Yes, we are engaging mofped and parliament to oppose, lobby, object. There is already excise duty on every transaction.” Uganda Bankers’ Association Executive Director Mr Wilbroad Owori told this website.

The government says the move is intended to encourage cashless transactions, promote e-commerce and improve tax compliance, as well as to increase revenue collection.

Mr Patrick Ocailap, the deputy secretary to the Treasury in the Ministry of Finance, the proposed tax is premised on the need to level the playing field by taxing banks the same way that mobile money transactions are taxed though bank executives argue that this will drive many out of banking.

Uganda Revenue Authority charges 0.5% tax on all mobile money withdraw transactions which the government introduced in 2018 in addition to 15% excise duty paid by mobile money subscribers through mobile money charges.

However, banks are only charged 15% by the Uganda Revenue Authority (URA).

Banks warn that a levy on withdrawals will discourage people from making deposits, while those who get paid in the banks might turn to withdrawing all their cash and keep it with them.