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Lawyers Reveal Why Mobile Money Tax Is Illegal

Lawyers advised government to scrap off the controversial Mobile Money tax, noting that it is illegal since the sector is not regulated.

Appearing before the Finance Committee on Thursday to give their views on the Excise Duty Amendment Bill No.2 of 2018 where government proposes to reduce the mobile money tax on withdrawals from 1% to 0.5%, lawyers from Muwema and Company Advocates wondered why Parliament has been able to pass certain bills into law within two days, but have failed to come up with regulations for mobile money since the industry came into operation in 2009.

Senior lawyer, Fred Muwema, who led the team reminded MPs of an ongoing case in High Court filed on 8th May 2018, where a one Mathew Kiwunda sued the Attorney General and Ministry of Finance seeking a declaration that the respondents failure and or omission to pass a law for the operationalisation, licensing and regulation of mobile money services in Uganda is an overt act of public non-feasance, irrational, unlawful and unreasonable.

In the suit, Kiwunda also sought for an order of mandamus to compel the Minister of Finance to originate and present a Bill to Parliament and well as another order to compel Parliament to enact appropriate legislation without delay for operationalisation, licensing and regulations of mobile money.


“We aren’t against taxation, but this giant (mobile money) is the biggest sector. So why don’t you regulate this sector? The mobile money guidelines issued by Bank of Uganda in 2013 indicate that anyone can be mobile money agent. In which country can this happen? Even Somalia can’t allow a criminal to run any financial service,” Muwema said.


He argued that financial issues are sensitive and shouldn’t be handled by people with bad integrity and criminal record.

“This sector (mobile money), you can get much more than you’re getting. You always pass laws here in two days. Pass the law quickly.”


He added: “Parliament cannot be said to be promoting orderly development and good governance under Article 79 of the Constitution if it abdicates its legislative duty and instead encourages taxation of mobile money platforms is such a critical part of the Ugandan economy that the country can suffer serious consequences it continues to be tethered by mis-regulation and now illegal taxation.”


He argued that currently, Uganda doesn’t have proper regulations on Mobile money, and highlighted the Financial Institutions Act 2014 that highlighted that only licensed financial businesses are mandated to carry out any financial services, with the same law making it an offence for anyone or institution other than the banks  to operate financial business.


He further noted that whereas Parliament went ahead to amend the Financial Institutions Act  2016, where the new law provided for introduction of agency banking and Islamic banking and as such widened the scope, this same amendments didn’t provide for mobile money services, which are majorly conducted by telecom companies.


Muwema argued that the new amendments in the Financial Institutions Act 2016, created a feeling that the issue had been sorted out, noting this was wrong and the argument can’t hold because mobile money is still branded as business of telecoms, yet the law requires having bank agents rather than having telecoms being the ones to offer financial services.


He said that as it stands, it’s an offence for anybody to advertise and lure someone into any financial business and anybody caught doing so would be liable to imprisonment of 10years.


He compared attempts by Government to collect tax from unregulated industry like mobile money to taxing kidnappers.

“… If you want to raise taxes from an illegal activity, you can start collecting taxes from kidnappers, money laundering. Parliament should avoid such a legal contradiction and nullity in the legislative process,” he said.


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