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BoU Backtracks, Now Supports Controversial Mobile Money Tax

mmanuel-Tumusiime Mutebile

Bank of Uganda has backtracked on its earlier position on the controversial Mobile Money tax where it said that the tax was not only discriminative, but was also going to adversely affect financial inclusion.

However,  in a new twist,  the Central Bank is now supporting the Excise Duty Amendment Bill No.2 that it aims  to reduce tax on all mobile money transactions from the earlier 1% to 0.5%.

The 1% tax on all mobile money transactions took effect on July1, 2018, with government projecting to collect about Shs118bn, but the tax was heavily criticized by a cross section of Ugandans.

In early August, BoU officials said mobile money transactions had declined by Shs672bn in the first two weeks of implementing the mobile money tax. They were against the new Ministry of Finance proposal of 0.5% tax.

However, in a meeting with the Finance Committee at Parliament today, Bank of Uganda Governor, Prof.  Emmanuel Tumusiime-Mutebile and the State Minister for Planning, David Bahati told the lawmakers that  the Ministry and Central Bank had harmonised their positions on the matter and agreed to have the 0.5% tax on Mobile Money withdraws retained.

“Following the meeting we had with the Governor, the staff with the Bank who interfaced with the Committee, this is the final position of Government… we are still standing by the tax measure; the reduction of measure from 1% to 0.5%. We think it will be a good step in the right direction,” Bahati said.

In an earlier interface with the Finance Committee, Charles Abuka, Director Statistics at BoU warned that the new tax levy has the potential to increase tax evasion and avoidance including use of informal methods of sending money.

Abuka also argued that even though the proposed bill reduces the tax to 0.5% and limits it to withdrawals, it is still not neutral, fair, equitable and has the additional dangers of retarding growth of financial inclusion, saying the tax on mobile money is likely to reverse the financial inclusion progress.

Abuka said that Mobile money industry had been critical at Financial inclusion growth to 55% in 2016, up from about 28% in 2010 due to continued growth in the population that uses mobile money services.

Figures from Bank of Uganda indicated that the average monthly mobile money transactions are valued at Shs6 trillion  which accounts for 6% of GDP in 2017/2018, a Shs2 trillion  increase in a period of one year, with the number of registered users currently standing at 23million which accounts for 62% of the population.

He warned that imposing additional tax on mobile money transactions would endanger this progress.

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