Government still reviewing new tax on all ATM cash withdraws 

The Ministry of Finance has said it is still studying a new tax on cash withdrawals as a way to reduce reliance on cash and promote digital transactions.

The Ministry however, dismissed reports on Sunday that the proposal is already part of the proposed revenue changes for the next financial year. 

Speaking on March 29, 2026, Permanent Secretary and Secretary to the Treasury, Ramadhan Ggoobi, said the proposal remains under study and has not yet been adopted.

Ggoobi explained that while discussions around taxing cash withdrawals exist, no final decision has been made. 

“This is NOT among the proposed revenue measures for the next financial year,” he said.

“Nevertheless, we intend to undertake further analysis in future on how to incentivize a gradual shift away from excessive cash transactions toward more transparent and formal financial channels.”

The proposed measure, as earlier outlined in policy discussions, suggests introducing a 0.25 per cent excise duty on all cash withdrawals across the financial system. 

This would cover ATM withdrawals, bank counter transactions, and agent banking services.

Currently, a 0.5 per cent tax applies to mobile money withdrawals. 

Authorities argue that expanding the tax to all channels would create a more balanced system and reduce disparities between digital and traditional financial users.

Government officials say the idea forms part of a broader strategy to reduce reliance on cash and promote digital transactions. Digital payments are easier to monitor, which could improve tax compliance and reduce unreported financial activity.

The proposal also aims to discourage excessive cash use and support the transition to a more transparent financial system. 

If implemented in future, it could also help limit tax evasion linked to cash-based transactions.