Transaction tax

Tanzania changes controversial taxes on e-money transactions

“We challenged the legality of the levy. LHRC supports the payment of tax but imposes a levy in addition to [regular] taxes are not fair.

By Inaara Gangji

The Tanzanian government has removed levies on e-money transactions of up to Tsh 30,000 through banks and again reduced levies on mobile money transactions by up to 50% from October 1, after public outcry. The decision was announced by the Minister of Finance and Planning, Dr Mwigulu Nchemba, in Parliament on Tuesday.

“We discussed and reviewed a number of issues, including reducing the tax burden and levies on people, encouraging the use of cash transactions, simplifying tax collection and preventing double taxation for both parties – i.e. sender and receiver,” he said.

The decision aims to reduce the financial burden of low-income consumers, especially small businesses, women and working-class people in rural areas who use mobile money extensively, and is a step towards better financial inclusion. .

Mobile money is a key driver of socio-economic growth and formalizes the economy, according to GSMA research.

Mobile money transaction levies were introduced in July 2021 by the government to fund social development projects, followed by the new electronic banking transaction levies from August 15 last year.

Following the introduction of the mobile money tax in 2021, the average transaction fee would have increased to three times the average fee for East Africa in July 2021. Withdrawal values ​​have declined and many users and businesses as a result, according to reports, suffered losses and abandoned the use of mobile money.

The levies have been criticized by some, with stakeholders saying they actually increase the burden on consumers. In August 2021, the Legal and Human Rights Center (LHRC) filed a complaint against the government.

“We challenged the legality of the levy. LHRC supports the payment of tax but imposes a levy in addition to [regular] taxes are not fair,” Anna Henga, executive director of LHRC in Tanzania, told FORBES AFRICA.

This is the third time that levies have been changed to help consumers cope with the rising cost of living.

Dr Nchamba said the government would now reduce spending. “Let us cut tea, snacks, domestic and foreign travel for officials of our ministries as ordered by the President (Samia Suluhu Hassan). Let us cut trainings, seminars, concerts, workshops.

The mobile money market in Tanzania reached a value of $54.5 billion in 2021 and had 33.2 million mobile money accounts, making the country the market leader in East Africa with 44% of adults having access to banking services through these services.

“We call on the government to completely remove the mobile money tax. This will support economic growth and allow citizens to fully reap the enormous benefits of mobile connectivity in Tanzania,” said Angela Wamola, GSMA Head of Finance. Africa, at FORBES AFRICA.

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