Governments across Sub-Saharan Africa are instituting steep taxes on mobile money services, potentially reversing the significant strides made in financial inclusion.
Countries like Tanzania and Kenya are witnessing a shift in the use of mobile money services due to these tax hikes.
In Tanzania, taxes introduced in 2021 have had a notable impact, with mobile money revenues decreasing, and this issue was discussed at the Mobile World Congress (MWC) 2023 event held in Kigali, Rwanda.
Tanzania’s Mobile Money Tax Experience
Tanzania introduced a tax levy on mobile money transactions in 2021, coupled with existing taxes, including value-added tax and excise duty.
Although the government reduced the levy by 73% in two stages, mobile money revenues took a hit, stabilizing at a lower level than before the tax.
This decline in usage patterns has raised concerns about the affordability of mobile money services in the country.
Impact on Financial Inclusion
Mobile money services have played a pivotal role in enhancing financial inclusion in Tanzania, with 72% of the population using these services, especially in rural areas.
However, the tax has led to a significant reduction in person-to-person and cash-out transactions, affecting the vulnerable and the poorest segments of the population.
Kenya’s Tax Challenges
Kenya is grappling with similar issues as businesses have shifted from mobile merchant payments to cash transactions due to increased compliance checks by the tax authority.
This shift raises concerns over transparency, as mobile money transactions improve tax payment and collection processes.
The Bigger Picture
Mobile money services have experienced remarkable growth in Sub-Saharan Africa over the last decade, with millions of registered accounts and active users.
These services have facilitated billions of transactions, improving transaction transparency and tax collection efficiency.
Conclusion
The imposition of higher taxes on mobile money services in Sub-Saharan Africa is having a significant impact on their usage and is undermining the progress made in financial inclusion.
As governments seek to balance tax collection and financial inclusion, finding a sustainable solution to maintain affordable and accessible mobile money services will be crucial for the region’s economic development and social progress.
