Bankers Concerned by Uganda’s Tax Dilemmas

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Bankers Concerned on Uganda’s Tax Dilemmas

By Matsiko Durman Trevor

It has been a bittersweet time for Uganda’s economy. On one hand, business has slowed down following vacillating tax proposals some of which have caused outrage among sections of Ugandans. The most famous are the taxes on mobile money and social media, which many Ugandans think are unfair.

President Yoweri Museveni in a statement dated July 4, 2018 said, “This is to clarify that there is no tax on mere depositing money on a mobile phone account.” However, remote mobile money operators City Television visited still charged fees for depositing. This is an implication of wavering policies and decisions.

He further clarified that the 0.5 percent tax, not 1 percent, is only on the sender and the receiver of money through mobile money.

Such pronouncements have big impacts on current tax dilemmas, whose impact extends to banking, and particularly; agent banking which according to the Executive Director Uganda Bankers’ Association Mr. Wilbrod Humphreys Owor employs 966 banking agents.

Agent banking stems from the April 25 2018 launch of shared agent-banking platform, and is expected to further grow since more partners such as mobile telecom firms have been brought on board.

Bank shareholders were smiling after their institutions declared the FY 2017/2018 results- the unaudited pre-tax profits for local banks show that profitability has increased.

While this looks rosy, senior banking industry players say sustaining banking is challenging. Patrick Mweheire the Chairman Uganda Bankers Association (UBA) is one of those speaking out following the 2018/2019-tax uproar.

He said that 6 banks are making losses and another six make less than 6 billion shillings annually an indicator of dismal performance.  According to Mweheire, this is not happening because of incompetence, but rather due to high cost of operation.

Mweheire who doubles as the Stanbic bank Uganda CEO submitted the bitter reality during a press briefing held on July 4 2018 at Uganda Bankers’ Association Offices in Muyenga.

He said that the banking sector, which is one of the giant taxpayers, is also being over taxed, debunking the belief that it is only the low class decrying government attempt to raise revenue to finance part of the 2018/2019 budget which totals to 32.367 trillion Shillings. (Watch video)

Mweheire says government is now reaching to the bottom of the pyramid to raise revenue and implored everyone to pay a fair share of tax to aid government programmes.

How then may banks keep afloat?

An international co-operative effort focused on the need to reduce financial fragility and systematic risks in global financial markets is urgently needed.

Enhancing financial market transparency, improving the international financial architecture and strengthening financial systems are three ways banking experts can fight financial fragility.

The government needs to pursue an advocacy agenda by working with regulators, practitioners, policymakers and various industry experts from international, regional and national spheres involved in facilitating and delivering financial and banking services to discuss and ensure that laws, rules or decisions serve the competitive interests of the banking world and the population.

Reforming the financial sector is a lengthy and complex process of institutional building and incentive reorientation, whose success requires full ownership of and participation in the process by society and government.

Developing countries like Uganda have made important progress toward improved financial supervision in the past few years.

Banks need to take advantage of IT to drive down costs, by encouraging use of cards, agency and mobile banking. By recent estimate, this has the potential to reduce trade costs associated with distance by as much as 65%.

With Uganda Bankers’ Association holding their Annual Bankers Conference for 2018 on July 17, 2018 under the theme: Financial Sector Stability: Managing Risk in a Growing & Fast Changing Environment, things could only change for the better when industry players agree on the common stand.

 

 

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