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.
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