In the first part of this article, we discussed the Corporate Income Tax and VAT and NHIL implications of mobile money in Ghana. In this part, we will take a look at the withholding tax implications,as well as the need for regulations to govern mobile money.
Withholding Taxes (WHT)
Ordinarily, payments for supply of goods, works and services by resident persons in excess of GH¢2,000 is subject to withholding tax at the rates of 3 per cent, 5 per cent and 7.5 per cent respectively. As such, withholding tax of 7.5 per cent applies on commission income received by banks for mobile banking services where the payer is a person other than an individual. This rate applies in the absence of a specific provision in the law addressing commissions payable to banks for mobile money services.
Interestingly, countries such as Tanzania has since 2013 introduced a specific withholding tax rate applicable to commissions paid or payable for mobile money transfer services. I believe that this is the right time for Ghana to consider a specific regime for the sector with a proposed lower withholding tax rate of say three per cent (as against the general service rate of 7.5 per cent) to further promote the growth of the sector.
Need for regulations
Given the ease with which owners can lose their mobile phones and the lack of reporting of financial transactions that can result in undocumented mobile money transactions, there is the need to have some rules on mobile money operations, especially in the areas of information security, documentation of transactions, regulator reporting among many others in Ghana. In Kenya and Uganda for example, there are laws on the regulation of mobile money activities such as mobile transfers and bill payments. I believe that it is in line with this thinking and happenings in other countries that the Bank of Ghana (“BoG”) recently issued new guidelines – “the Electronic Money Issuers (EMI Guidelines) and Agent Guidelines” – to regulate mobile financial services in the country. These guidelines are designed to promote use of agents as channels for the delivery of financial services via mobile phones and establishment of necessary controls to mitigate risks associated with such transactions while protecting customers from unintended consequences of patronising such services.
Currently, the BoG-issued guidelines do not include rules that specifically address the participation of banks in the mobile money business.
The area of concern for banks is the competition ensuing between banks and telcos in the provision of financial services such as advancement of loans via mobile platforms. It is my hope that the BoG would issue further guidelines or regulations to protect the interest of all stakeholders.
When strict rules are designed and implemented to guide the operations of mobile money, this will provide a level playing field for the banks and the telcos to operate in the market as there would be more clarity on the rules and processes governing the operation in the market.
Author: George Kwatia is a tax leader in PwC Ghana.
Feature orginally appeared in the Graphic Business
