Which way out: Cash or cashless-based economy?

Mobile money and bank transaction levies are said to derail Tanzania’s efforts towards building a cashless economy, financial inclusion. PHOTO | FILE

What you need to know:

  • Customers are complaining, especially in rural areas, even though Tamnoa continues to provide the best possible services to the community

Dar es Salaam. The newly introduced bank levies and mobile money transaction levy run the risk of undermining years of work of moving the country towards a cashless society, stakeholders from various fronts warned yesterday.

While the bank levies took effect this month under the Electronic Transactions Fee regulation, the mobile money transactions levy that increased the cost of sending, withdrawing and transferring money to the bank, came into force in June last year.

Thus, four days after the Electronic and Postal Communication Act (CAP 306) came into effect in June last year, the Tanzania Mobile Network Operators Association (Tamnoa) said business had dropped drastically, asking the government to amend the new charges.

“Customers are complaining, especially in rural areas, although we continue to provide the best possible services, recognising that mobile financial services are an important service to the community. We believe the government will see the need to take appropriate action because the tax affects business and hurts ordinary people,” said Mr Hisham Hendi who served as chairperson of Tamnoa and was the CEO of Vodacom Tanzania Plc.

“Mobile money agents feels the pinch,” an agent based at Tabata in the city, Mr Toni James said, adding that some customers were accusing him of scamming by deducting inordinately huge sums in money withdrawal transactions.

He said the business was already dropping and people were now not using mobile money transaction services as they normally used to.

Following the uproar in 2021, it comes as no surprise that the mobile money and bank levy have been met with sharp criticism, with stakeholders saying they were adding yet more costs onto consumers. This also comes after the government revised fees charged on mobile money transactions after much uproar, which some say are still high.

A recent survey by Twaweza that sought to investigate people’s opinions on the state of the national economy and on the recent levies imposed on mobile money transactions indicates that the move could adversely affect the government’s revenue generation targets as Tanzanians shift to other means.

Unofficial data from the report which involved sampling of 3,000 people shows that 80 percent of the respondents were aware of mobile phone transaction charges, while 34 percent did not support the introduction of such charges.

“Forty four percent reported that they have reduced sending money over the phone, while the amount of money they receive over the phone decreased since July 2021. For the residents of Dar es Salaam, the amount has decreased by more than 70 percent…,” reads part of the survey.

According to statistics from Tanzania Communications Regulatory Authority (TCRA) based on a report ending June 2022, the trend of mobile money transactions in the past three years from 2019/2021 has slightly increased.

TCRA report shows in 2019 the value of money transactions across all service providers accrued to Sh101.8 trillion.

The amount increased to Sh127.9 trillion and Sh137. 216 trillion in 2020 and 2021 respectively.

However, from January to June 2022, the value of transactions stood at Sh63.210 trillion, which is equivalent to monthly transactions of Sh10.535 trillion. Going by the previous trends, 2022’s total value of mobile money transactions might be less than previous years by the end of the fourth quarter.

Mr Aidan Eyakuze, the executive director of Twaweza, said, “Fees have increased the cost of important services, they have caused citizens to significantly reduce the use of these services and may at long last affect revenue collection.”

Further, Tanzania Petty Traders Association vice chairman Stephen Lusinde said the new levies run the risk of undermining years of work to bring lower-income and rural communities into the financial system.

He said with harsh levies people, especially the lower class, might look back at cash payments or transactions.

Under the new bank levies, according to experts, the deductions are more than twice from one source - an unnecessary and costly procedure in the process of establishing another source of government revenue.

According to economic experts, what is in the new charges, are deductions made at each step when a person wants to use his/her earnings, something that is not advisable on taxes.

It is on that grounds that Mr Lusinde said instead of sending money to a relative in his home village using mobile money or mobile banking, one could opt to send it physically, just to avoid levies.

“The mobile money transactions and bank levies as they stand now go against the government’s avowed aim of expanding financial inclusion,” said Mr Lusinde.

He was of the view that the government should lower the levies to a level that even a lower class citizen could feel no or less pinch.

Tanzania Business Community director for communications Stephen Chamle seemed to have been reading from the former’s script.

He said the existing levies were unhealthy for the country’s economy because they would likely pull traders out of the formal financial transaction. As it is, it is high time the government did away with double taxation.

“It does not sound good for traders who pay all forms of taxes to be subjected to bank levies when they deposit money and or withdraw,” said Mr Chamle. Again, he said, consider an employee whose salary is paid through the bank, if he decided to transfer it to his mobile wallet, he will be charged and when he wants to withdraw it, he is charged as well.

This is one income that has been subjected to Pay As You Earn (Paye), suggesting that three taxes have been deducted from one source.

“We are one of the biggest victims of double taxation because many traders prefer cashless payments for convenience,” recounted Mr Chamle.

Querying: “How can a trader who makes an average of five to 10 transactions on a daily basis prosper under these numerous levies?”

Mr Chamle recommended the government to stop milking traders dry and instead focus on broadening the tax base.

“We are confident that the president is good at listening to the private sector and as a matter of fact, she will work on the grievances,” he stressed.

Concerning the outcome of the Twaweza report, ACT-Wazalendo Youths wing chairman Abdul Nondo noted during an online social audio space Kumekucha, “Citizens often support leaders who represent or address their issues. This should be a lesson to political leaders. They need to know people’s priorities: high cost of living, unemployment and low wages.”

He added “We need to link our leadership with people’s struggles. This shows that we are in line with what matters to them.” For his part, Mr Matojo Kosatta, an advocate, said that the Constitution plays a pivotal role in addressing people’s challenges.

As such, he called for the need of a new Constitution centred on addressing pressing matters of citizen concern other than just calling for an independent committee, citing Kenya’s Constitution which he said had issues closer to citizens such as finances and others alike.