Dar es Salaam. Days after the Electronic Transactions Fee regulation took effect, tax experts say the new law was not evaluated for its effects because it goes against the principles accepted across the world, therefore, it should not be implemented.
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.
"Consider an employee whose salary is paid through the bank. If he decided to transfer it to his M-Pesa or Tigopesa 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 PAYE... you cannot deduct three taxes from one source," said Dr. Balozi Morwa, senior lecturer at the Catholic University of Mbeya (CUCoM).
A senior lecturer at the University of Dar es Salaam, Dr Deogratius Mahangila, said that the charges levied on electronic transactions exceed the acceptable levels.
"This is not even double taxation but a multiplicity of levies imposed after the government saw that many transactions have shifted to the digital space. If it continues, it will reduce the motivation to use financial services. It needs to be re-examined, I suggest that it be reduced," advised Dr Mahangila.
The lecturer said the top amount of Sh4,000 should be reduced to Sh500 to give citizens relief during these difficult times when prices of fuel and other commodities such as food are spiraling.
"We all know that tax is important for government to provide basic social services, but it should not hurt the citizen. As it is now, everyone is careful with every shilling they spend. Levies should not be abolished completely but should be reduced to a tolerable amount, Sh500 is not bad," he said.
Effects
Dr Morwa, who is an international consultant on taxation, said there are two things that are evident in the new levies, which the government was not careful when passing it.
"Research and development is important in everything, but here it seems that the result was not taken into account, this is the complaint of the people. Another thing they forgot to do is conduct levy incidence analysis, that's why you see one person being charged more than once from the same income," said Dr Morwa.
Charges which involve transactions made on mobile phones or bank accounts, he said affect many people who should have been involved before it was passed and came into effect.
He mentioned some of the stakeholders in the chain of electronic transactions such as the banks themselves and bank card companies (Mastercard or Visa card), owners of telecom companies, agents of financial services provided by telcos as the customers who are the citizens.
"Most of these institutions depend on the number of transactions for their income and profits. The number of transactions that were taking place gave income to every important stakeholder that is why the business flourished. If transactions decrease, the effects will affect all of them," cautioned Dr Morwa.
Are these levies or taxes?
According to Dr Morwa, it is still not clear whether these are levies or taxes, but what is clear, in his opinion, is that government is hiding behind the term levies so that it doesn’t paint a picture that it is violating globally accepted tax regulations.
Normally, he said taxes are charged nationally but the charges are under certain authorities, especially councils, and are placed on specific services such as waste collection or security.
"If the council imposes a waste collection fee, it is understood that it is the cost of paying for the vehicles and the staff who provide the service. If the service is suspended, the charge does not continue. But on bank transactions, it is not clear how the charges came about," he said.
According to him, because the deductions haven’t been well explained, that is why neither the Tanzania Revenue Authority (TRA) nor any other ministry came forward to educate and motivate the people to pay as is done in other areas to boost government's coffers.
"These charges also hurt businessmen who take their sales to the bank and who pay profit tax due to the services they provide. If he withdraws money and puts it on his phone, he is deducted, when he sends it to someone there are deductions and the final recipient also pays levies. For a long time we have been encouraging the digital economy, but these efforts are going to meet obstacles. There are many deductions that reduce the motivation to use digital financial services," he said.
He added: As a result, people will go back to the old ways of keeping money in the house, in the process benefiting thieves who will want to pry on the loopholes of carrying hard cash.
Due to widespread complaints, the tax consultant said it is important for the government to come forward and educate the people about the difference between levies and taxes so that they understand why these deductions are made from their money which has already been subjected to other taxes due to its source.
"It is very important for TRA not to remain silent. This is the time for them to come forward and explain to the public to pay taxes at their own free will," advised Dr. Morwa.
Regarding educating the public, the Director of Taxpayer Education of TRA, Richard Kayombo said: "Since the charges have been issued by the ministry, I ask you to speak to them to give you the clarification you need," he said.
As citizens feel the pinch of taxes and levies, they still see the government's management of public revenue as non-existent as a result it always decides to increase or decrease the deduction rates without involving them.
"Difficult questions about taxes and levies are not asked before they are approved. As citizens we are left complaining outside the official systems. If we get the opportunity to speak to authorities all we do is praise them for the construction of clinics or roads whereas it is their responsibility to manage the use of public funds," said Zena Abeid, a university student in Mbeya.
She says the levies are too general to the extent that even those who are not required to pay taxes by the law end up paying.
"For example, a student who is given a loan by the board (Higher Education Loans Board) from now on will be charged by the same government that loaned him before he starts using it. Remember, when he finishes college, he will have to pay it with interest. In other words, you are taxed when the loan given has not produced any profit, so they reduce the amount available for your use. Right now, even donations will be charged," said Zena
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