Mobile Money transactionsUganda is to impose a 10% tax on cash transfers by mobile phones and other money transfer operators. International remittances from Ugandans living abroad are also affected. Finance Minister Maria Kiwanuka said she also planned to raise $16.5m (£10.6m) by imposing a levy on incoming international phone calls.

Ms Kiwanuka had to come up with ways to plug a $214m hole in the annual budget after donors cut aid over accusations of corruption.

The new mobile money transfer tax could affect the 8.9 million customers using six mobile phone networks in Uganda. The government hopes to raise $12m annually from the tax, it reports.

Mobile money transfers are extremely common in Uganda as many people, especially in rural areas, do not have bank accounts. Transfers are used to send money to relatives and even settle some bills.

David Holliday, managing director of Uganda Telecom, said the new tax would mean a significant increase in the cost of the service.

“Mobile money has become part of people’s everyday lives because they don’t need to carry cash. Even those who were formally unbanked have mobile money accounts with a service provider of their choice because it’s cheap,” David said.

Ms Kiwanuka said the aim of the budget was to target those who avoid or do not pay taxes and set targets for the revenue authority to make sure taxes are actually collected.

“All the tax proposals that have been mentioned add up to about 3% of existing taxes and they’re still subject to parliamentary approval,” she said.

Credit: BBC