Uganda Government Scraps 0.25% Tax Proposal on Cash Withdrawals

The Ugandan government has backed away from imposing a 0.25% excise duty on all cash withdrawals, a measure originally suggested by the Uganda Revenue Authority (URA) to boost revenue and push for a cashless economy.

After engaging with financial experts, industry players, and users, the proposal was dropped from the Excise Duty Bill tabled on March 25. A tax analyst noted that this updated version overrides the initial URA plan, meaning it won’t go to Parliament for now.

Permanent Secretary to the Treasury, Ramathan Ggoobi, confirmed last week that the idea remains under review, with no final decision made. He emphasized ongoing efforts to cut cash dependency and expand digital payments.

Critics like Joseph Lutwama from Financial Sector Deepening Uganda argued that taxing withdrawals, rather than income, could stifle economic activity and income generation. They pointed out that the tax, projected to raise Shs250 billion short-term, might harm growth more by reducing money circulation’s multiplier effect.

Previous attempts, such as the 0.5% tax in 2018, caused mobile money usage to drop, raising fears of pushing transactions into informal channels and hindering financial inclusion and digital payment goals.

Experts urge focusing on widening the tax base through income taxation instead, seen as a fairer path to sustainable revenue without burdening transactions.

This article is based on a report from the Daily Monitor.