The introduction of a new tax on ATM withdrawals in Uganda has been proposed as indicated in a published letter from the Secretary to Treasury to the Governor of Bank of Uganda. This suggestion was made in a meeting held with officials from the Uganda Communications Commission, Uganda Revenue Authority, Bank of Uganda and Telecom operators as part of budget consultations ahead of the next financial year.
According to the letter that has been circulating all over social media, the new tax on ATM withdrawals in Uganda will cater for agency banking and ATM withdrawals. The logic of this tax is quite simple. An extra charge will be incurred on top of the bank withdraw charges Ugandans are already paying for every time they decide to get money using the mentioned means.
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Increasing charges such as withdraw charges has proven to be efficient for commercial banks since its hard for customers to take note of exactly when such changes are made unless the bank makes the announcement prior. Early last year, commercial banks like DFCU and Stanbic increased their ATM withdraw charges which could’ve gone easily unnoticed by customers.
Looks like the government could be on its way to introducing this new tax on ATM withdrawals in Uganda through the Central Bank. However, lessons from the past under similar conditions show that such taxes are not welcome by the public since they directly impact people by deducting their money that has already been subject to other taxes like PAYE.
In 2018, a 1% mobile money excise duty was introduced on mobile money transactions like receiving money, withdrawing and transferring to another mobile money account. This tax caused outrage among many Ugandans because it meant that the government was taking 1% from Ugandans’ cash for using mobile money. Due to heavy backlash, the tax was later revised by the Ministry of Finance and changed to 0.5% which is currently charged on withdrawals only.
The Impact of the proposed new tax on ATM withdrawals in Uganda
A breakdown of the impact the proposed tax if passed into law by Parliament would mean that someone’s income would reduce by a certain rate that we are not yet aware of. Ugandans would be charged a certain amount to withdraw any money from their accounts. Most people that own bank accounts in Uganda are salary earners which means that their money has already been subjected to PAYE (Pay As You Earn) and NSSF charges. With the proposed tax, people would have to pay an extra charge to now withdraw their money.
This could see people diverting to the traditional way of saving money since keeping it in the banks is going to become costly. If people are not saving their money in bank accounts, the commercial banks will run low on deposits which are the most reliable assets. Eventually, they will not be able to give out loans which serve as a source of income through the interest rates they charge hence the banks could eventually close.
Reactions from people on social media about the proposed new tax on ATM withdrawals in Uganda are expressing outrage and frustration as many claim that they’ll just opt to receive their salaries in cash if the tax is passed into law.
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