Three months after slashing its mobile money (MOMO) transaction levy by 43%, Tanzania has scrapped the MOMO transfer levy starting October 1, 2022.
Aside from MOMO transfers, the government will also scrap the fee for bank transfers and also waive the transaction fee on withdrawal of cash through bank agents and ATMs for values not exceeding Tsh30,000 ($12.81), according to Tanzania's Finance and Planning Minister, Mwigulu Nchemba [pdf—in Swahili].
He further noted that the government is looking to reduce its expenditure—by slashing spending on things such as conferences, training, refreshments, and trips—to cover the revenue it will forego from the cancelled levies.
"The collection of transaction fees has enabled the Government to provide basic services for our citizens in the financial year 2021/2022. For example, the Government spent a total of 7 billion shillings ($58,043) resulting from the levy of transactions for building classes." — Mwigulu Nchemba
The history of MOMO tax in Tanzania
Tanzania introduced a fee on mobile money transfer and withdrawal transactions, excluding merchant, business, and government payment transactions effective 15 July 2021. The levy applied in addition to VAT (18%) and excise duty on mobile money transfers and withdrawal fees (10%).
Following criticism from the Tanzanian public, the fee was reduced by 30% in September 2021. Due to the introduction of the mobile money levy, the number of P2P transfers and cash-out transactions fell heavily in July and August 2021 to only slightly stabilise in September 2021, according to GSMA Tanzania Mobile Money Levy Analysis [pdf].
In addition to reducing their usage of mobile money, users also removed their assets from their mobile money accounts to use them through alternative payment methods such as cash, GSMA revealed.
Mobile Money taxes in Africa
Outside the East African country, Ghana introduced a 1.5% tax on the transfer amount of electronic transactions in May 2022. The objective is to improve tax revenues by tapping into fast-growing digital financial services (DFS).
Starting January 1, 2022, Cameroon also unveiled a 0.2% tax on mobile money transactions under the 2022 tax bill that was assented to by President Paul Biya. The Cameroonian mobile money tax was with sharp criticism, sparking an online campaign #EndMobileMoneyTax in the central African country. Uganda and Zimbabwe have also implemented MOMO taxes.
Meanwhile, Kenya, Nigeria, South Africa, Egypt and Mauritius are among the African countries exploring plans for digital money taxes.
Africa now accounts for 70% of the world’s $1 trillion mobile money value. The value of Africa’s mobile money transactions edged up 39% to $701.4 billion in 2021 from $495 billion in 2020, highlighting the future of African banking is mobile. GSMA's figures released on April 21, 2022, show the volume of mobile money transactions jumped 23% to 36.7 billion in 2021 from 27.5 billion in 2020.
- This is a developing story, it will be updated with more details.
- GSMA is yet to respond to our questions regarding the impact of this tax reversal on the Tanzanian MOMO landscape.