Taxing mobile money transfers: Both sides have a point

This caution has been raised as research is being pursued in the wake of an increasing tendency to raise levies on mobile money transfers which have been seen in Tanzania each budget year. Mobile phone activities are now the new cash cow for the government, long used to training its revenue guns on beverages and tobacco.

There are also some research reports or perhaps it is their presentation that has tended to enhance images of the mobile phone industry and money transfers as a whole as a massive outlying region taking up a huge chunk of the national economy. 

Reports said that up to one half of the Gross Domestic Product is being transacted on mobile phones annually, and it is precisely this aspect that whets appetites among revenue seekers, and caution on the part of consultancies tasked with examining business trends in that sphere. Is all money transfer business transaction?

Plenty of such transfers don’t constitute business in the sense that they constitute acts of delivery of goods or values already paid for, in which case there is a reduction of auxiliary activities to deliver the cash, when mobile phone is used. 

That means the final activity of delivering the cash isn’t part of an added value chain which operates until the cash is paid or is ready to be delivered by transfer, a situation that a tax official or strategist would wish to figure out as ‘payment,’ also including cash sent to family members, close relatives. Some transfers though are value adding.

In that case only the latter type of transfers could make an object of capturing some of the value being added, from a welfare outlook, while from a business outlook even this dimension may have a discouraging effect, in which case those consultancies say this discourages investments in that sphere. 

Well said but definitely taxation ought to be directed where activity is growing, in which case mobile money transfers can’t escape taking its fair share of the tax burden, now that virtually all of us can’t do without that facility. Even within a city or town, it is easier to send cash by phone than climb a bus to deliver it physically, and the taxation is less than the bus fare.

There is another aspect of the taxation quest for instance what came up in the previous Budget exercise, where the Treasury was targeting earnings of mobile phone companies from those transfers, and the firms were working tooth and nail to redirect the charges to users. 

Eventually it appears the regulators brought the mobile cash firms to heel, such that they were now absorbing the charges from their earnings rather than imputing the cost on users, but they have ways of playing around with that. For instance competition leads them to offer packages of air time at a reduced cost, but careful monitoring shows that customers fail to get envisaged air time after being connected. 

When those things happen sporadically by thousands of instances, they claw back the cash lost in the levies, at the risk of discouraging some users of those packages, etc.