Bankers protest proposed ATM cash tax
Commercial banks have objected to the government proposal to impose a 0.5% levy on all cash withdrawals made through ATMs, saying the move would be counterproductive.
According to the proposed Excise Duty Amendment Bill 2024, the Government is proposing that effective July 2024, withdraws of cash via ATMs would be subjected to a 0.5% excise duty.
However, banking industry stakeholders argued that the tax would increase the cost of financial services and curtail financial inclusion measures for all Ugandans.
- According to records on the Bank of Uganda website, ATM withdrawal charges in Uganda range from UGX600 -UGX1,500, with ABC Bank charging the highest amount of UGX1,500 followed by Stanbic Bank at UGX1,200 per transaction.
The bankers argued that an additional levy on withdrawals would have the effect of discouraging people from making deposits, while those who get paid in the banks might turn to withdrawing all their cash at once to keep it in their houses.
Speaking at a public debate on theme; “Impact of tax proposals on the banking sector and the economy, Robin Bairstow, the CEO of I&M Bank, called for further consultation, noting that tax proposals affecting the banking sector deserve thorough consideration as they have far reaching implications for both financial institutions and the broader economy.
- “We are committed to engaging with stakeholders to ensure that tax reforms promote a vigorous banking sector while positively contributing to Uganda’s economic prosperity,” he said.
According to an analysis by the Kampala Associated Advocates, the new tax proposals would have a wide-ranging impact as the banks would simply transfer the burden to the customer.
In a seating on May 5, Members of Parliament rejected the proposed 0.5% levy on every withdrawal of cash through financial technology services. Led by Speaker Anita Among, the House argued that the move would be detrimental to the growth of the digital financial services industry and would be an unnecessary burden on consumers.
Amos Lugoloobi, the State Minister of Finance and Planning, conceded to the deletion of the proposal from the Bill. But the proposal on ATM withdrawal tax was deferred to allow for further consultation.
Meanwhile, the House maintained Excise Duty on Opaque Beer and introduced an ad valorem Rate on drinking water. The committee recommended maintaining excise duty on opaque beer, while reducing excise duty on alcoholic or non-alcoholic beverages locally produced, excluding kombucha, to 12 per cent or UGX250 per litre.
- The House also adopted the Committee's recommendation introducing an ad valorem rate of 10 per cent or UGX75 per litre on mineral water, bottled water and other drinking water to create uniformity for the industry.