Cama challenges 1% mobile money tax: ‘Insult in Malawi budget!’

The Consumers Association of Malawi (CAMA) has called on government to withdraw the  the proposed one percent withholding tax on non-bank mobile money transactions, saying the tax is against financial inclusion initiatives.

The proposed one percent withholding tax on non-bank mobile money transactions causes stir

CAMA has since urged the Minister of Finance  Joseph Mwanamvekha to remove the proposal from this year’s national budget currently being deliberated in Parliament.

Mwanamvekha said in his budget statement that the tax will ensure that more people are motivated to contribute towards national building and government has a scope to improve service delivery.

But in its  statement to Nyasa Times signed CAMA’s Executive Director John Kapito, the consumer rights body has described the tax as segregative against the poor.

“It is also against fairness and neutrality, some of the pinnacles of taxation. This is so because the tax is only applicable to non-bank led transactions. There has been no consultation with Consumers and Industry players before inclusion of the proposed tax in the budget statement,” argued Kapito.

The proposed new tax is being introduced on top of several other multiple taxes being levied on the consumers and will have a multiplier effect as a single cash-in transaction stands to be taxed on subsequent transactions.

Kapito argued that whilst broadening of the tax base is desirable, there are other areas that can be considered such as taxes on transaction fees and taxes on interest earned on mobile money trust accounts.

“Similar tax  on transactional values has been introduced in other countries within the region and have ended being repealed or modified after a lot of public outcry. Most countries have confined themselves to taxes on fees, commissions and interest.

“Mobile money has greatly contributed to Malawians’ access to financial services with over 7 million subscribers transacting through Mobile Money wallets in Malawi, as well as job creation with over 40,000 agents facilitating Mobile Money operations,” he added.

Only 2 countries within the SADC region have similar tax i.e. Zimbabwe applying 2% on transactions above $20 (which has hence been outlawed by the courts) and Uganda applying 0.5% down from 1% after public uproar; being tax applied only on withdraws.

Said Kapito: “There is need for a serious reflection on the Tax Position that is likely to destroy all the gains which have already been made by all players in the quest to achieve financial inclusion. Disproportionately impacts the low-income Consumers who are the biggest users of mobile money.

“Will discourage savings (many low income Consumers don’t have bank accounts. They keep money in mobile wallets for future use instead of having hard cash) – and financial inclusion. Impact on mobile money services usage especially on payment transactions – most Consumers are likely to stop using mobile money because of the transaction costs.”

According to Kapito, once the new tax is implemented, mobile agents will earn less due to tax pressure on consumers; there will be loss of rural and low income consumers who will drop use of mobile money, and there will be no access to electricity, water, TV subscriptions, airtime, etc.

“Most mobile money transactions employ a large number of Malawians who are called agents and any drop in mobile money services due to higher charges and cost will result in higher unemployment which will have a negative effect on the livelihoods of many people.”

Kapito has since accused government of betraying social contract consumers, saying consumers need to be consulted and have their say on such matters.

“Mobile money tax is disproportionately harsh to the low income Consumers – against equality as provided for in section 20 of the Republican Constitution (equality). Introduction of the tax will result in Consumers stopping using mobile money. This means the tax will have negative social effects and reduce the same tax base in the long run.”

The latest figures from the Reserve Bank of Malawi shows that as of June 2019, the total number of registered mobile money subscribers was 7 million, with only 37.4% of subscribers using the service during the second quarter of this year.

The report also show that there are 45, 929 mobile money agents 81.1% located in urban and semi-urban areas while 18.9% are in rural areas.

Follow and Subscribe Nyasa TV :

Sharing is caring!

0 0 vote
Article Rating
Follow us in Twitter
2 Comments
newest
oldest most voted
Inline Feedbacks
View all comments
Andrew Longwe
Andrew Longwe
1 year ago

I totally agree with the taxes , if you don’t tax a poor person now …you won’t tax him when he is rich ..he will evade tax as he is not used.

A FEW GOOD MEN
A FEW GOOD MEN
1 year ago

Thanks Kapito, big up, you represent us. We will support you.

shares
Read previous post:
Malawi commemorates International Youth Day:  Zathu donates to Chilanga school for the Blind

Malawi on Monday, 23 September joined the rest of the world in commemorating International Youth Day (IYD) under the  theme...

Close