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Govt makes U-turn on airtime scratch cards as state agencies strike common position on Mobile Money Tax

Frank Tumwebaze, the Information Minister was asked by the Speaker Rebecca Kadaga to hinder govt to restore airtime cards in writing to Parliament. (FILE PHOTO)

KAMPALA– Government has agreed to restore the use of airtime scratch cards to ease access in the countryside following public and civil society’s outcry.

The move follows a consultative meeting between Members of Parliament on the ICT committee, telecom companies and officials from the Uganda Communications Commission (UCC) held last month.

According to Speaker Rebecca Kadaga, the Information Minister Frank Tumwebaze put government commitment to restore the airtime cards in writing to Parliament.

The government also retracted previous disagreements on the 0.5 percent tax measure and agreed on a common position to support the mobile money tax bill.

The bill seeks to legalise and harmonise mobile money transactions.

While appearing before the Parliamentary committee on finance on Tuesday afternoon, junior Finance Minister David Bahati revealed that all government agencies including Bank of Uganda had resolved to support the bill.

The bill had earlier faced countrywide criticism and a number of contradictions with different government agencies including the Central Bank and financial experts castigating it as a bad law also citing that it could spur financial exclusion.

Minister Bahati however, said that the small mishaps have been solved and that all government bodies have agreed with the 0.5 percentage.

“Following the meeting we had with the Governor, the staff of the [Central] 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 percent to 0.5 percent. We think it will be a good step in the right direction,” Bahati said.

In an earlier interface with the Finance Committee, Bank of Uganda officials argued that imposing high taxes on nationals does not generally mean it is an avenue for a country to raise revenue. They also revealed that mobile money transactions declined by 672bn shillings in the first two weeks of implementing the tax.

Charles Abuka, Director Statistics at BoU had also warned that the new tax levy has the potential to increase tax evasion and avoidance including use of informal methods of sending money.

He argued that even though the proposed bill reduces the tax to 0.5 percent and limits it to withdrawals, it is still not neutral, fair, and 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 the mobile money industry had been critical at financial inclusion growth to 55 percent in 2016, up from about 28 percent 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 percent of GDP in 2017/2018, a Shs2 trillion increase in a period of one year, with the number of registered users currently standing at 23 million which accounts for 62 percent of the population.

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

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