In recent years, several African countries where mobile money transactions are a popular means of payment have imposed levies on digital transactions, much to the dismay of local consumers and small businesses, who have been hit hardest.
While proponents of the Electronic Transaction Levy (eLevy) on mobile money transfers argue that it creates an important revenue stream for governments in emerging economies and brings otherwise untaxed informal sector economic activities within the purview of taxation, the introduction of the tax is in most cases The Fall Markets are facing significant backlash.
Learn more: The African mobile money tax experiment
Countries like Ghana are sticking to their guns, but the government of Tanzania recently announced it would drastically limit the scope of the tax from October 1 after widespread public dissatisfaction with the country’s digital transaction levy, introduced in July last year was common.
The East African nation introduced the fee for mobile money transfers and withdrawals, excluding merchant, corporate and government payment transactions, but after public criticism and a sharp drop in the number of mobile money transactions, the government was forced to lower the fee by September 30%
An analysis by the GSMA found that after the levy was introduced, the average mobile money transaction fee increased from 3% to as much as 369%, leading to a sharp drop in transaction volume.
While the analysis shows that mobile money use in Tanzania has recovered somewhat after the September levy cut, it has still not returned to pre-July levels. And despite continued opposition, the government announced a further 43% cut in fees nearly a year later in August of this year.
Related: Africa’s digital future beyond mobile money
Now, in the country’s latest tax regime change, the levy on transactions between banks and mobile money networks will be completely abolished. Tanzanians will also bid farewell to transfer fees for cash withdrawals from banks, mobile money agents and ATMs of 30,000 Tsh (12.86 USD) and under.
Other countries are watching with interest
Outside of Tanzania, taxes on mobile money have been controversial in other countries as well, with critics raising several objections.
In Ghana, which introduced its own “e-Levy” of 1.5% on all mobile money transactions over 100 cedis (ca union representing the country’s mobile money agents.
Continue reading: eLevy raises mobile money concerns in Ghana
In a statement calling for the tax to be abolished, MMAAG argued that eLevy threatens agents’ profit margins while also being “very dangerous to the country’s digitization focus”. Like many critics of mobile money taxes, MMAAG argues that eLevy could undo much of the progress made in recent years by driving Ghanaians looking to avoid additional costs back to using cash.
Also read: The Changing Face of Mobile Money in Ghana
Additionally, the UK-based Institute of Development Studies released a research study earlier this month showing that Ghana’s eLevy disproportionately affects the poorest members of society, who end up paying more fees than a fraction of their income.
Ghana’s eLevy was also opposed by the country’s main opposition party, the National Democratic Congress. And with presidential elections scheduled for 2024, Tanzania’s decision to abolish taxes on mobile money is likely to become a key talking point in Ghana’s political debate.
In Cameroon, meanwhile, even the more modest 0.2% levy introduced earlier this year has drawn criticism from certain quarters, with the hashtag #EndMobileMoneyTax trending on Twitter.
For other countries that have introduced similar levies, as well as those considering doing so in the future, Tanzania’s final decision to rescind its mobile money tax serves as a warning of how widespread opposition to the measure may eventually force changes.
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