The government in Ivory Coast has imposed a 0.5% tax on cash transfers and estimates that it will receive about XOF10bn (USD18.2mn) per year from this move.
The charge applies to transfers made through both mobile operators and remittance companies using mobile applications. Announcing the levy, the tax authority hinted the sum received could be even higher than XOF10 billion, as it was currently struggling to track the amount of money passing through the platforms.
The last sentence is very telling. The government does not even know the amount of money passing through these platforms that it intends to slap with the levy, but hey, let us just tax it. This cash-cow mentality is unfortunate but not entirely unexpected. To be fair, according to the same article, the Ivorian government is following in the footsteps of Kenya, Tanzania and Uganda where a 10% excise tax is applied on mobile money transaction fees and Zimbabwe, which adds a surcharge to each individual transaction.
The article quotes Brian Muthiora, GSMA regulatory director for Africa, who has previously talked about the negative impact of taxing mobile money transactions.
Rather than levying taxes on the fledgling mobile money industry, governments should consider enabling the growth of mobile money services by digitizing the payment of fees, rates, taxes and levies due from taxpayers.
I would be inclined to agree with Brian, albeit only to some extent. Cash collection is a major headache for governments in Africa. A lot of loopholes exist and mobile money platforms can provide some mechanisms for driving the much-needed but woefully lacking efficiency in revenue collection. Rather than use mobile money services as a cash cow, African governments should consider mobile money platforms as a channel through which they can improve on their fiscal duties. The benefit is in using mobile money platforms to collect taxes and service charges and to also deliver better services to citizens, as opposed to raiding the platform itself for easy revenue.
The matter, however, does not stop there.
What Brian should also impress upon GSMA members who are in the African space, is the need for telcos to engage with regulators and evangelize (vigorously) on how to use mobile money platforms, with demonstrable scenarios and figures, before governments reach out for the easy tactic of levies. Not all regulators will be won over and it is possible that some will just copy-paste what they see in other jurisdictions – the lure of additional “easy” tax is too much to resist… but the risk of not trying is the assurance that sooner or later, these measures will be applied across Africa because nobody is challenging the precedent that has been set.
