Tax exemption on software boosting technology growth

Thursday May 19, 2011

Information and Communication Technology (ICT) companies operating in Uganda are attributing the fast growing technology uptake levels among local firms to government’s intervention through exempting taxes on software.

Companies have not been paying taxes on imported software; an initiative Government undertook five years ago to reduce costs on technology in the country’s general development.

Software is the type of technology that enables computers to perform given functions; for example it’s modern software that enables one to; deposit, withdraw, send money and pay utility bills using mobile phones.

Management at Neptune Software, a global company specialising in information, communication and technology integration into the banking systems sounded contented with the technology uptake levels of the local banking industry.

According to Raymond Badanga, of Neptune Software, business in Uganda is convenient because of Government’s policy of exempting taxes on software, thus making the country fall under the bracket of the African countries where especially banking technology is well embraced.

“It was a developmental move for government to exempt us from paying taxes for our software; some institutions can find technology integration expensive yet it is very important in any business systems development, therefore, making it cheaper was a rational idea and has streamlined our local operations,” he told said recently.

“Despite some capital challenges facing some financial institutions, Uganda is one the leading African countries in embracing banking technologies, to the extent that many microfinance institutions and SACCOs are mindful of the relevancy of making technology part of their operations” he said.

In a related development, Business Vision learnt recently that the Credit Reference Bureau (CRB) had issued at least 530, 837 financial cards since it started operating in Uganda in 2009. Compuscan, a South African company mandated by the Central Bank to manage the CRB and issue financial cards to individuals and organizations, charges sh15,000 per card. This could also be attributed to the reduced costs of doing business as far as software costs are concerned in Uganda.

Michael Sengo, the manager in charge of account management at Compuscan said that over half a million people is an encouraging position given that there are 1.2 million borrowers currently in Uganda.

“At the end of last month, we had 29 clients including commercial banks and microfinance deposit taking institutions, more than 530, 837 financial cards have been issued and currently we issue an average of 900 cards per day,” he said.

The electronic financial cards contain information about the borrowers’ loan acquisition and payment history, the information is shared among all Compuscan’s clients to serve as a credit risk control measure in case someone defaults a given bank and runs to another.

The New Vision