The government is mooting imposing taxes on “alternative” payment platforms like PayWay, Ezeemoney, and agent banking because the recently introduced mobile money tax does not apply to them, the state minister for finance, David Bahati told Parliament’s Committee on Finance.
“The tax [Mobile Money] does not apply to alternative payment platforms such as Ezeemoney, PayWay and agency banking which creates a challenge of equity,” Mr Bahati said. “After this amendment, next financial year, we will probably look at this.”
Mr Bahati was appearing before the committee together with the Bank of Uganda governor, Emmanuel Tumusiime-Mutebile, to make final submissions on the Excise Duty (Amendment) Bill, 2018, which the committee is considering.
The law, which went into effect on 1 July, imposed a 1% tax on mobile money transactions and a daily Shs200 payment to access Over the Top (OTT) internet platforms like WhatsApp, Facebook, and Instagram among others.
However, following intense public criticism of the bill, it was returned for amendment after a directive by President Museveni. Specifically, the committee is looking at lowering the tax on mobile money transactions.
Mr Museveni claimed the 1% tax on mobile money transactions had been decided by mistake and should instead have been 0.5%. That 0.5% levy should also have been placed on all transactions other than deposits. He promised that Parliament would “correct” the law by amending the Excise Duty (Amendment) Bill 2018.
The committee is in the final stages of writing its report to the House and is expected to formalise Mr Museveni’s directive.
Although Mr Bahati says the government was to tax platforms like Payway and agent banking in pursuit of equity – even though this seems to not have been a concern with the OTT tax, which is Shs200 every day for each Ugandan, regardless of their income – the motivation could be because they have become alternatives to mobile money for many.
The taxes on mobile money transactions, coupled with telecom charges – which were already relatively high – have turned away many who now prefer the “alternative payment platforms” – to borrow from Mr Bahati – for transactions like bill payments. Still, some shun mobile money for the other platforms out of principle – to avoid paying a tax they strongly disagree with.
So the government thinks it should impose taxes on those platforms if its taxation of mobile money – ostensibly to increase government revenue – is to be effective. There is also the very strong possibility that telecoms, whose revenue from mobile money has declined as a result of the tax, have protested that they are losing business to the platforms.
Mr Mutebile, the central bank governor, told the committee that Cabinet approved amendments to the Bank of Uganda Act to allow it regulate mobile money transactions – which were Shs63 trillion in 2017, according to Mr Bahati.
“In February 2018, Cabinet approved an amendment to the Bank of Uganda Act to empower BoU to regulate and supervise payment systems, including mobile money services. The final draft of the Bill is expected by the end of September 2018,” said Mr Mutebile.
In response to an MP – Elly Asiku of Koboko North – who asked why the platform was only being regulated now, Mr Bahati said mobile money is regulated but not “sufficiently”, hence the need for an improvement on the legislative framework.
He added that the government expects to get Shs115bn from the 0.5 % levy on mobile money this financial year, which will be used to finance the budget.
This is an edited version of an article that was first published on the Parliament of Uganda’s website. Read the original article here.