Reduce taxes on telecoms, mobile money fees: experts

Friday June 14 2019

Finance and Planning Minister Phillip Mpango

Finance and Planning Minister Phillip Mpango displays the briefcase containing the FY-2019/20 Budget before presenting it in Parliament yesterday. Photo |Edwin Mjwahuzi 

By Khalifa Said @ThatBoyKhalifax ksaid@tz.nationmedia.com

Dar es Salaam. Stakeholders in the telecommunications sector have called upon the government to reduce the excise duty on telecommunications and mobile money transfer fees, saying doing so would increase mobile telephony penetration and the resulting revenues and profitability all-round.

The current excise duty rate on telecommunication services is 17 per cent – and a ten (10) per cent fee for mobile money transfers.

Analysts say the airtime excise duty of 17 per cent is the highest among the six East African Community (EAC) member states. They also call for reduction of the fee on mobile money transfers from the current ten per cent to seven (7) per cent or thereabouts.

They also want the rate of excise duty on electronic communication services reduced from 17 to 14 per cent.

If the foregoing is agreed to by the relevant authorities, then the changes could easily be incorporated in the government budget for the 2019/20 financial year which officially begins on July 1 this year.

And, if it all happens as envisaged, then it would have a multiplier effect on the economy, as it would be supportive of the growth of all stakeholders in the telecoms industry, including suppliers, dealers, agents – as well as players in money transfer transactions. “The current rates contribute to low mobile penetration. This leads to lower growth of the telecommunications industry and its economic (macro and micro) contribution as they make the services very expensive,” says the Tanzania Private Sector Foundation (TPSF) in its Tax Reform Proposals for FY-2019/2020 submitted to the Ministry of Finance for consideration.

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Mr Harold Daudi is a project manager with Peertech Telecom, a local telecommunications contractor based in Dar es Salaam. The man heartily endorses the TPSF recommendations, saying that they are intended to make telecommunications more of a service than a business.

“I think the government is contradicting itself; while it wants bigger mobile penetration, it at the same times charges high rates on mobile money transfers,” Mr Daudi explains.

“This ends up hurting the ordinary person who cannot have access to banking, and who uses a mobile phone in financial transactions.”

A reduction in the rate, Mr Daudi argues, would also increase the use of modern technology, especially in the areas of data and mobile money services across the country, including rural Tanzania.

“It is also a positive step towards the excise duty harmonization process within the EAC regional bloc,” he says.

The stakeholders also propose amending Section 124 (6A) of the Excise (Management and Tariff) Act by reducing the excise duty rate on mobile money transactions from ten per cent to five per cent, with effect from July 1, 2019.

They project that doing this can improve the affordability of mobile money services, thereby leading to enhanced financial inclusion.

This is especially taking into consideration the fact that only a small minority of the Tanzanian population has access to formal banking products and services.

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