THE government's ongoing aggressive tax crackdown
is now set to shift its attention to telecoms companies in the country
as President John Magufuli seeks to squeeze more taxes from mobile money
transactions that are now worth a staggering Sh43 trillion annually.
President John Magufuli
President
Magufuli, speaking in Dodoma on Friday, publicly declared that his
government's tax collection drive will now target mobile phone
companies.
"These phone companies are carrying out large volumes of transactions, but that money does not go to the government. Their medicine is brewing, it will soon be ready," Magufuli said in his speech before he received a report on academic fraud in the civil service.
A Tanzania Economic Update report issued by the World Bank earlier this month showed that the mobile phone revolution in the country has led to a surge in mobile money transactions.
"Both the total value and number of transactions has grown at double digit rates annually, with the ratio of mobile money transactions to GDP (gross domestic product) standing at around 47 per cent, with a value of Sh42.9 trillion ($20.7 billion)," said the World Bank report.
The president noted that the average monthly revenue collection has now surged to Sh1.3 trillion from Sh800-850 billion previously thanks to his government's unrelenting tax collection drive.
He said the substantial increase in tax collection has enabled his government to invest in flagship public infrastructure projects, such as construction of a standard gauge railway, purchase of new planes for Air Tanzania Company Limited (ATCL) and provision of free basic education.
Magufuli's government, which has already hiked taxes on mobile money transfers, now seems to be seeking a bigger share of the multi-trillion shilling transactions.
In its maiden 2016/17 budget unveiled last year, the government imposed new taxes on financial services including mobile money transfers.
The new taxes implemented include an 18 per cent tax on bank fees and commissions in the form of value added tax (VAT) and a 10 per cent excise duty for sending and withdrawing money through mobile phone money transfers.
Magufuli first made public his intention to crack down on tax payments by mobile network operators (MNOs) in April, last year, when he dismissed the then director general of the Tanzania Communications Regulatory Authority (TCRA), Ally Simba, and dissolved the TCRA board of directors.
The president said that TCRA had failed to track tax obligations of mobile phone companies through the Telecommunication Traffic Monitoring System (TTMS), hence causing the government to suffer a loss of potential tax revenues of Sh400 billion a year since 2013.
The President's Office said last year that TCRA had signed a contract with a private firm for installation of the telecommunications traffic monitoring system, but failed to use it.
Money spinner
Communications is the fastest growing sector in Tanzania, which posted a 0.9 per cent annual increase in the number of mobile phone subscribers in 2016 to 40.17 million.
Mobile phone use has surged in Tanzania and other African countries over the past decade, helped by the launch of cheaper smartphones and affordable data.
The number of mobile money users in the country grew to 18.08 million last year from 17.63 million previously.
The three biggest players in mobile money transfer services in Tanzania are Vodacom, Tigo and Airtel.
Halotel and Zantel have a smaller market share of mobile money transfers and subscribers.
According to the World Bank, with 2.5 bank branches and 6.4 automated teller machines (ATMs) per 100,000 adults, Tanzania ranks in the bottom quarter of countries in terms of access to traditional financial access points.
However, mobile money has contributed to increasing the share of payments conducted electronically, with mobile money transactions accounting for about half of the overall total of electronic payments in Tanzania.
Over time, mobile money operators have become the providers of choice for the majority of Tanzanians to carry out money transfers.
This means that any significant increase in taxes on mobile money transfers will likely be transferred to users and hit hard millions of Tanzanians who rely on the service.
Magufuli launched a general tax crackdown since coming into office in November 2015 and ordered the Tanzania Revenue Authority (TRA) to target large-scale tax evasion by big companies.
The government's tax crackdown is currently focused on the mining sector, with Tanzania's biggest gold producer, Acacia Mining Plc, coming under considerable pressure from the taxman.
Magufuli has accused mining companies of not paying their fair share of taxes, saying Tanzania has for too long been robbed of its natural resource wealth by multinational companies.
The president has already appointed two separate committees to conduct an investigation into hundreds of export-bound shipping containers of gold and copper concentrates owned by Acacia Mining to establish if all the relevant taxes were being paid.
"These phone companies are carrying out large volumes of transactions, but that money does not go to the government. Their medicine is brewing, it will soon be ready," Magufuli said in his speech before he received a report on academic fraud in the civil service.
A Tanzania Economic Update report issued by the World Bank earlier this month showed that the mobile phone revolution in the country has led to a surge in mobile money transactions.
"Both the total value and number of transactions has grown at double digit rates annually, with the ratio of mobile money transactions to GDP (gross domestic product) standing at around 47 per cent, with a value of Sh42.9 trillion ($20.7 billion)," said the World Bank report.
The president noted that the average monthly revenue collection has now surged to Sh1.3 trillion from Sh800-850 billion previously thanks to his government's unrelenting tax collection drive.
He said the substantial increase in tax collection has enabled his government to invest in flagship public infrastructure projects, such as construction of a standard gauge railway, purchase of new planes for Air Tanzania Company Limited (ATCL) and provision of free basic education.
Magufuli's government, which has already hiked taxes on mobile money transfers, now seems to be seeking a bigger share of the multi-trillion shilling transactions.
In its maiden 2016/17 budget unveiled last year, the government imposed new taxes on financial services including mobile money transfers.
The new taxes implemented include an 18 per cent tax on bank fees and commissions in the form of value added tax (VAT) and a 10 per cent excise duty for sending and withdrawing money through mobile phone money transfers.
Magufuli first made public his intention to crack down on tax payments by mobile network operators (MNOs) in April, last year, when he dismissed the then director general of the Tanzania Communications Regulatory Authority (TCRA), Ally Simba, and dissolved the TCRA board of directors.
The president said that TCRA had failed to track tax obligations of mobile phone companies through the Telecommunication Traffic Monitoring System (TTMS), hence causing the government to suffer a loss of potential tax revenues of Sh400 billion a year since 2013.
The President's Office said last year that TCRA had signed a contract with a private firm for installation of the telecommunications traffic monitoring system, but failed to use it.
Money spinner
Communications is the fastest growing sector in Tanzania, which posted a 0.9 per cent annual increase in the number of mobile phone subscribers in 2016 to 40.17 million.
Mobile phone use has surged in Tanzania and other African countries over the past decade, helped by the launch of cheaper smartphones and affordable data.
The number of mobile money users in the country grew to 18.08 million last year from 17.63 million previously.
The three biggest players in mobile money transfer services in Tanzania are Vodacom, Tigo and Airtel.
Halotel and Zantel have a smaller market share of mobile money transfers and subscribers.
According to the World Bank, with 2.5 bank branches and 6.4 automated teller machines (ATMs) per 100,000 adults, Tanzania ranks in the bottom quarter of countries in terms of access to traditional financial access points.
However, mobile money has contributed to increasing the share of payments conducted electronically, with mobile money transactions accounting for about half of the overall total of electronic payments in Tanzania.
Over time, mobile money operators have become the providers of choice for the majority of Tanzanians to carry out money transfers.
This means that any significant increase in taxes on mobile money transfers will likely be transferred to users and hit hard millions of Tanzanians who rely on the service.
Magufuli launched a general tax crackdown since coming into office in November 2015 and ordered the Tanzania Revenue Authority (TRA) to target large-scale tax evasion by big companies.
The government's tax crackdown is currently focused on the mining sector, with Tanzania's biggest gold producer, Acacia Mining Plc, coming under considerable pressure from the taxman.
Magufuli has accused mining companies of not paying their fair share of taxes, saying Tanzania has for too long been robbed of its natural resource wealth by multinational companies.
The president has already appointed two separate committees to conduct an investigation into hundreds of export-bound shipping containers of gold and copper concentrates owned by Acacia Mining to establish if all the relevant taxes were being paid.
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