If a Tanzanian resident is tasked to list popular words in the past few months, I am certain mobile levy famously known as Tozo will eventually feature. The genesis of mobile levy can be traced back to the Finance Act 2021 which amongst other amendments, amended the National Payment Systems Act by introducing section 46A which imposed mobile levy ranging from TZS 10 to TZS 10,000 on mobile money transfers.
The imposition of the mobile money levy prompted public outcry and uproar from the citizenry as well as tax stakeholders across the country who pleaded for such levy to be scrapped off or revised downwards as it undermined financial inclusion and business prospects in the context of the telecommunication and mobile money agency industry.
President Samia Suluhu subsequently intervened by asking the Minister for Finance and Minister for Communications and Information Technology to review the mobile money levy on mobile transactions. This resulted in the downward revision of the said mobile money levy by thirty percent (30%) with the maximum levy chargeable on such mobile money transactions being revised from the previous TZS 10,000 to TZS 7,000.
The Finance Act 2022 amended the National Payment Systems Act by further revising downwards the maximum levy chargeable on mobile transactions from TZS 7,000 to TZS 4,000 and expanding the scope of such levy to cater for all electronic money transactions as opposed to previous inclusion of electronic mobile money transactions only. This expansion prompted more outcry from citizens as well as tax stakeholders across the country who again pleaded for the Government’s intervention.
It will be appreciated that upon expansion of scope of mobile levy to cater for all electronic money transactions, users were subjected to mobile money levy whenever transacting electronically i.e., transferring money from their mobile wallets to bank accounts and vice versa or transferring money within one bank.
On 20 September 2022, the Government decided to scrap off this amendment that covered all electronic transactions. Effectively from 1 October 2022, no levy was chargeable on electronic transactions from banks to mobile wallets and vice versa as well as electronic transactions within one bank.
On my end, I have learnt a few things with regards to mobile levy saga including but not limited to;
i. Improving our tax policy formulation process
With regards to mobile money levy saga, one could argue that the saga could have been avoided by having effective engagements/consultations between the Government and the relevant stakeholders prior endorsement of the proposed tax changes.
The current tax policy formulation process which accords taxpayers with a period of almost two weeks between the presentation of the Finance Bill and assentation of that bill into Finance Act is not enough for effective and sufficient consultation with the relevant stakeholders.
The Government could borrow a leaf from our neighbouring countries i.e., Kenya and Uganda who present their finance bills almost two to three months prior to their endorsement thus providing a room for effective and sufficient discussion on the proposed tax amendments.
It is imperative to acknowledge that the Government has recently commenced gathering views and suggestions from tax stakeholders on how best the current tax policy formulation process can be enhanced.
Being one amongst the tax stakeholders that was invited by Ministry of Finance under the umbrella of KPMG in Tanzania to air suggestions on how best the current tax policy formulation process can be revamped, I can attest the Government’s strong commitment on the same.
ii. Power of public – private dialogue
The Government should be commended for its willingness to engage, interact, and listen to concerns from tax stakeholders and citizenry across the country on the issue of the mobile money levy.
This has resulted in the downward revision of the mobile levy as well as scrapping off of the electronic money transactions levy introduced on the banking side through the Finance Act 2022.
It was also gratifying to witness the national tax dialogue during the past few weeks aiming to champion a fairer taxation system and bolster economic growth through promulgating tax policies that will champion foreign direct investment (FDI).
Such platforms that facilitate public – private dialogue as the recently held national tax dialogue should be encouraged as they give a platform for tax stakeholders to share their suggestions and views on a fairer taxation system.
iii. Tax stakeholders’ role
The mobile money levy saga prompted numerous tax stakeholders such as tax consultants, tax accountants and economists to provide their professional opinion on how such levies potentially negatively impact tax collection, financial inclusion as well as economic growth.
Tax stakeholders need to maintain the same momentum in pointing out tax provisions that are impeding investment prospects or a fairer taxation system. For instance, change in control provisions under section 56 of Income Tax Act (ITA), 2004 or disclosure requirements for contractors under section 44A of Tax Administration Act (TAA), 2015 are some of the provisions impeding investment prospects in the country that could benefit from technical input from tax professionals.
iv. Tax base expansion
Every fiscal year, taxpayers will submit their tax proposals to the Government asking for reduction of myriad of taxes for instance the reduction of VAT rate from the current 18% to 16%.
However, the Government rarely entertains such requests since with every tax relief availed to taxpayers, the Government needs to come up with alternative tax revenue sources to fund its activities.
The Government should continue its efforts to expand the tax base as evidenced in the prior fiscal year by requiring each individual aged 18 years or above to have a Tax Identification Number (TIN). The Government could potentially bank on the untapped potential of informal sector for tax expansion prospects.
It is only through expansion of the tax base that we can address tax multiplicity in the country thereby extending tax reliefs through reduction or scrapping of nuisance taxes and levies.
The views stated above are those of the author and not necessarily those of his employer.