Tanzania’s 10% tax on Mobile Money Transactions Criticized

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Tanzania like Kenya unveiled its 2016/17 budget last week. The budget increased spending by 31% with a heavy focus on infrastructure and industrial projects in the next fiscal year. The ambitious $13.53 Billion budget will see the Tanzania budgetary deficit widen to 4.5% of GDP, which the government plans to cut to 3% through aggressive revenue collection. To boost revenue collection, the Tanzania government imposed new taxes on financial services including mobile money. These new taxes implemented include 18% to bank fees and commissions in the form of

To boost revenue collection, the Tanzania government imposed new taxes on financial services including mobile money. These new taxes implemented include 18% to bank fees and commissions in the form of value-added tax and 10% excise duty for sending and withdrawing money through mobile phone money transfer. Tanzania has a growing mobile money user base with 16 Million subscribers across various channels. Previously, the costs were limited sending of money. According to Tanzania’s Citizen Paper, the minister of finance stated the new taxes are meant to seal tax evasion loopholes as well as tap into the fast expanding mobile money space which currently transfers billions.

The new taxes have been criticized as counterproductive and likely to impact financial inclusion in Tanzania. The nation’s rural and poor citizenry depend on mobile money services to access financial services and the 10% tax on sending costs and 10% on withdrawal charges might prove costly as they impact them directly. Among popular mobile money services in Tanzania include M-Pesa, Airtel Money and Tigo Pesa. There was talk of a similar move in Kenya, following a similar proposal by the Kenya Revenue Authority but it seemingly did not materialize.

img credit: Citizen.co.tz

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