East African country Tanzania, has scrapped fees imposed on mobile money transactions. The government had to backtrack the implementation of levies on electronic transactions following a public outcry from the citizens.
Before the levy was introduced, Tanzania’s mobile money industry was booming, which saw a total of 9.5 trillion shillings ($4 billion) being transacted electronically.
The number of mobile money accounts in the country stood at nearly 26 million at the end of 2019, while the market size was valued at US$45.5 billion.
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The recent removal of the levy will be implemented on October 1, which was disclosed by the finance and planning Minister Mwigulu Nchemba while addressing the parliament.
He said; “I would like to present this report whereby we have made the following adjustments that would reduce the burden of transaction fees in society.
“The amendments made are to cancel the levies for transferring money from banks to mobile networks (and vice versa) and to cancel levies for transferring money within the same bank.
“The government will scrap the fee for transferring money from one bank to another, and also waive the transaction fee on withdrawal of cash through bank agents and ATMs for values not exceeding Tsh30,000 ($12.81).
“We discussed and reviewed a number of issues including reducing tax and levies’ burden on the people, encourage the use of cash transactions, simplifying tax collection, and avoid double taxation for both parties –that’s the sender and receiver”.
The minister further noted that the government is looking to reduce its expenditure by slashing spending on things such as conferences, training, refreshments, and trips to cover the revenue it will forego from the canceled levies.
Although, before the removal of transaction fees, the minister stated that it enabled the Government to provide basic services for its citizens in the financial year 2021/2022.
For example, the Government spent a total of 7 billion shillings ($58,043) resulting from the levy of transactions for building classes. However, after a careful review, it has deemed it fit to scrap the fees due to the negative impact it had on the lives of its citizens.
In July 2021, the government of Tanzania introduced a levy on mobile money transfer and withdrawal transactions, excluding merchant, business, and government payment transactions.
The levy applied in addition to VAT (18%) and excise duty on mobile money transfers and withdrawal fees (10%).
Following criticism from the Tanzanian citizens, the fee was reduced by 30% in September 2021. Due to the introduction of the mobile money levy, the number of P2P transfers and cash-out transactions fell heavily in July and August 2021 to only slightly stabilize in September 2021.
Also, there was a massive decline in the use of mobile money, as users removed their assets from their mobile money accounts to use them through alternative payment methods such as cash.
Tanzania’s Telecom companies in Tanzania also disclosed that they witnessed an immediate change in their revenue since the government introduced the levy, as it dropped drastically because consumers were no longer using the service anymore.The levy also took a great toll on online businesses because of the increase in cost for customers.
With 26.1% of Tanzanians living below the poverty line (equal to $1.35 per person per day in purchasing-power-parity terms), the scrapping of the levy imposed on electronic transactions is indeed sigh of fresh air for Tanzanian citizens as it will reduce the financial burdens of its citizens, especially those in rural areas.