Economics of mobile money transactions levy dynamics
Changes such as the introduction of additional charges on mobile money transactions and Sim card levy, would require significant system changes to implement. PHOTOS | FILE
The mobile money transactions levy introduced in Tanzania in the 2021/22 fiscal year has been among the major issues of discussions.
The dynamics around this levy can be discussed and understood in various contexts. This piece is the second part in this matter. Part one appeared in this column on September 4, 2021. The third and last part will appear here on September 18, 2021.
Complaints
The new charges caused vehement complaints from citizens immediately after the rates were applied from July 15, 2021. The complaints took place mainly in social media including in such handles as WhatsApp through various groups, Facebook and Tweeter. This shows the power of social media as a new platform in shaping and reshaping fiscal (and other) policies. Elsewhere it could have taken the form of physical demonstrations or heated debates in the Parliament mainly between opposition and ruling party Members of Parliament (MPs). With the Tanzania’s current (2020 – 2025) Parliament being predominantly composed of the veteran ruling party Chama Cha Mapinduzi (CCM) lawmakers, such heated Parliament debate is not expected.
Contested areas
The main contestation has arguably not centred on the levy itself but on its rate. Accepting the levy implies that citizens are aware of the need for the government to have funds for it to be able to provide public goods and services for the country’s development.
However, they disagree with the high rates. The argument against the rate is that it was too expensive for most citizens to afford.
Economically, this implies that the citizens are price sensitive partly due to low disposable incomes. Even if they had high incomes, the extensive use of mobile money transactions per day in making various payments imply substantial erosion of that income.
The rates have also been criticized in the perspective of being regressive to the hard-won financial inclusion battle in Tanzania thanks to the widespread of mobile telephones across the country and hitherto absence of extra transaction costs in form of the said levy.
Addressing the complaints
Following the directive given by President Samia Suluhu Hassan on July 19, 2021, the complaints were addressed by the Ministry of Finance and Planning in collaboration with the Ministry of Communications and Information Technology. The President’s intervention is seen as part of political economy of fiscal policy and its instruments. Tax in general and the levy in particular can influence and be influenced by politics. In issues-based elections, tax is among key issues.
The Presidential intervention changed the tone on the levy discussions and direction of the rate of the levy in favour of citizens.
Citizens engagement in policies
The political economy response by the President to this fiscal policy instrument shows that citizens engagement in policies in general and fiscal policy and its instruments in this context in particular is important. However, it also shows that citizens do not engage and intervene at appropriate stages and times of fiscal policy making process. They complained after the levy had gone through various stages.
The stages include the proposal in the Parliament, call for stakeholders’ inputs for a period of about one week after the budget was unveiled in the Parliament and before the 2021 Finance Act was passed and parliamentary discussions of the budget before endorsing it. All these were avenues for interventions that could have ‘blocked’ the levy.
Understandably though, the issue was not the ley but the rate which was set by the Ministry of Finance and Planning and not in the parliamentary budget approval process. However, this does not remove the fact that few people do follow up the budgeting process with the view of influencing its outcome.
It is however known that some groups do follow and try to influence the outcome of the budgetary process in favour of their constituencies in Tanzania. They include some Private Sector Organizations (PSOs) and Civil Society Organizations (CSOs). Majority of Tanzanians however, arguably wait for outcomes of budgetary process and register their dissatisfactions. The levy in question is among the cases in point.
