A smart robber fleeces you with a pen and a handshake. From Zimbabwe to Kenya, Uganda to Benin, African governments are on a tax-raising spree, looking for easy money, ostensibly to help fund successive revenue shortfalls and budget deficits. Often, the money ends up being misappropriated by corrupt public officials. The best weapon in government hands is now your mobile phone – the closest thing most citizens in the continent have to a functional bank account.
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Milking the Poor: African Governments Enforce a Raft of New Taxes on Mobile Money
Faced with the informalization of the economy and a record increase of mobile money transactions, as citizens pull their own weight against unemployment and financial exclusion, taxmen in Africa have pitched up on the last frontier, punishing the poor who are often denied cash rewards for their labor.
In Zimbabwe, finance minister Mthuli Ncube this week increased taxes on mobile money transfers to 2% on each dollar from the previous flat 5% on the amount transferred, joining an expanding list of African governments intent on squeezing every dollar from impoverished citizens.
The new tax looks like a reduction. It is not. It is a rise in all costs for every transaction. For every dollar spent, Zimbabweans now have to pay 2 cents. In the past, they paid only 5 cents for every transaction, including those exceeding $1. With 96% of transactions in Zimbabwe done electronically, the new tax means that citizens, already battling severe cash shortages, will have to pay more each time they buy bread or fuel or transfer money to a relative, by mobile or bank. The latest increase doesn’t account for the 15% VAT levied on goods and services, and a slew of taxes already charged by mobile carriers and banks, such as balance enquiry.
It also means easy revenue for the government. So far this year, cashless transactions have reached 1.7 billion, said the finance minister, compared to just 50 million four years earlier. That’s the equivalent of $64 billion moved via mobile phones and other electronic means by the end of June, according to data from the Reserve Bank of Zimbabwe. If the 2% on every dollar is applied, state coffers will get a boost of $1.28 billion.
“There is need to expand the tax collection base and ensure that the tax collection points are aligned with electronic mobile payment transactions and the real time gross settlement system,” Ncube said, in a statement on October 1.
Zimbabwe joins several other African countries including Kenya, Tanzania, Uganda, Zambia, Benin and Rwanda, in either raising taxes on mobile transfers or internet access, ostensibly to fix perennial revenue shortfalls and runaway budget deficits.
M-Pesamill in Kenya
Kenya recently increased electronic transfer excise duties by cellular phone providers, banks and money transfer agencies from 12% to 20% per transaction, meaning it will now cost Kenyans more to send money across platforms like mobile money service provider Mpesa or to request bank statements. The government of President Uhuru