BoU makes U-turn on 0.5% Mobile Money tax

Wednesday September 12 2018

Business. A man makes a Mobile Money

Business. A man makes a Mobile Money transaction in Namuwongo, Kampala, yesterday. PHOTO BY ABUBAKER LUBOWA 

By Moses Kyeyune

Parliament. The Central Bank and the ministry of Finance have agreed to support the proposed 0.5 per cent Mobile Money tax they had earlier condemned as discriminative. 
State minister for Planning David Bahati told MPs on the Finance committee yesterday that Bank of Uganda (BoU) Governor Emmanuel Tumusiime-Mutebile together with the ministry had reached a position on the tax following a meeting.

“Following the meeting you had with the staff of the Central Bank, we had a meeting in the ministry and a meeting with the Governor Central Bank; it was actually the [BoU] staff who attended this meeting [in parliament]…. this is now the final position of the government; we are still standing by the tax measures and a reduction of [Mobile Money tax] from 1 per cent to 0.5 per cent,” Mr Bahati said.
Mr Mutebile, who appeared before the committee, did not object to the minister’s remarks.

The development comes a month after the Central Bank’s technical team told the committee that the tax is “discriminative”, warning that it was likely to affect financial inclusion in the country.
The BoU officials, who also appeared before the committee alongside their counterparts from telecom companies, said because of the unpopular tax, the mobile money transactions had declined by Shs672b in the first two weeks of implementing the tax. Although BoU staff wanted the Bill shelved, Mr Mutebile later met Finance ministry officials and agreed on a different position. 
However, Mr Bahati yesterday said the decision was reached after wide consultations and strategic engagement with all organs of the government, including agencies and departments. “This is the final position of the government on this matter. We are still standing by the tax measure and the reduction from one per cent to 0.5 per cent,” he said.

The Governor, who did not contrast Mr Bahati’s position on the Bill, also explained why there is no law to regulate the sector.
Mr Mutebile cited the Bank of Uganda Act 2000. “Section 4, which stipulates the mandate of Bank of Uganda, is silent on the regulation and supervision of payments systems including Mobile Money,” he said.
He added that the provisions in the Financial Institutions Act also pose limitations on licensing of Mobile Money services since the Act only applies to deposit-taking institutions.

He also stated that in its current form, the Mobile Money sector is a money transmission service, which requires a separate law.
Mr Mutebile said Cabinet last year approved the Policy and Principals for National Payments Systems Bill, which covers regulations of such services as Mobile Money and that a draft of the Bill has gone through the first parliamentary council and will be presented to the House by next month.
Finance committee chairperson Henry Musasizi (NRM, Rubanda East) said the committee has completed consultations on the proposed tax and promised to embark on report writing before the Bill is presented in the House for second reading.

Mobile money tax plan
Target. Government seeks to collect Shs118b from Mobile Monet tax by end of this financial year. 
The law. The Excise Duty Amendment Act 2018, which brought in place the Mobile Money tax was assented to by President Museveni and signed into law on June 21, 2018.