Mobile Money Taxes: Aping the Inept

Well, sad to say but we expected this. Commsrisk recently predicted that the “me-too” game of increasing taxes on mobile money was going to affect a number of countries where mobile money has caught on.

Zimbabwe’s government has raised statutory taxes on mobile money and electronic transactions in a fresh bid to secure additional revenue within the cash-strapped country.

Finance Minister Mthuli Ncube announced that the country’s mobile money transfer tax has been revised from 5 cents per transaction to 2 cents “per dollar” transacted.

Due to the increase in in formalisation of the economy and huge increase in electronic and mobile phone based financial transactions and RTGS transactions there is need to expand the tax collection base and ensure that the tax collection points are aligned with electronic mobile payment transactions and RTGS system.

First, let us not discuss this “informalisation” phenomenon that the good minister is talking about – I am afraid I will run out of expletives.

The same article quotes Zimbabwean Finance Ministry statistics that show about 1.7 billion transactions have been effected through mobile money in the country so far this year and this is a sharp increase from the 50 million transactions via e-platforms 4 years ago. Of course somebody in the ministry sat and thought: “all that cash, we have to find a way to milk it.”

These short-sighted tax measures seem to be a way of life in Zimbabwe. In 2003 Zimbabwe introduced the Intermediated Money Transfer Tax and in 2016 introduced a 5% health tax levied from airtime and mobile internet top-ups.

The tragedy of Africa can be distilled into running narratives of positive stories (driven by the resilience of a people determined to succeed) weighed down by negative stories (perpetuated by governments fond of half-assed measures). A perfect illustration is Zimbabwe. In the same month, Zimbabwe is reportedly now “food secure” and is likely not going to import maize as farmers have delivered over 1 million tons to the Grain Marketing Board (GMB).

One would imagine that these farmers have to be paid by the GMB anyway, so why not use mobile money to pay them? This infuses cash into the digital economy and will lead to those farmers using the same e-money in other areas e.g. purchasing produce for the next planting season. In turn, this will spur more agricultural stores to adopt mobile money pay points and embed the culture of buying and selling using mobile money.

Let us think of the farmer – he has more use cases for mobile money. He probably needs to pay school fees for his kids. If schools know farmers have been paid using mobile money, they are likely to adopt pay bill collection points on mobile money. Hey, with this windfall, even the farmer’s wife needs to make her hair and buy a new dress. So next, time she goes to the trading center, perhaps the husband could just send money directly to the tailor or the hairdresser? All this leads to more transactions and even if they are taxed at the old rate, government gets more, and everybody is happier.

Hmm, seems that would take some thinking. And require some work. Easier to just raid the existing transaction base.

Joseph Nderitu
Joseph Nderitu
Joseph Nderitu is a consultant who specializes in revenue assurance. He is currently contracted as Head of Revenue Assurance and Fraud Management at Vodacom's operation in Tanzania, having previously served in the same role at Vodacom Mozambique.

Before his work with Vodacom, Joseph was an internal audit manager for Airtel, with responsibility that covered their 17 countries in Africa. Whilst at Airtel, Joseph led reviews of the Revenue Assurance, Customer Service and Sales & Marketing functions.

Prior to his stint at Airtel, Joseph was an RA manager at Safaricom in Kenya. He holds an MSc Degree in Information Systems.