Malawi opposition quashes 1% tax on mobile money transactions:  ‘War against the poor’

Main opposition Malawi Congress Party (MCP) and United Democratic Front (UDF) have accused government of the proposed one percent withholding tax on non-bank mobile money transactions  which threatens the financial inclusion agenda as the cost of the service will likely rise.

In his 2019/2020 national budget, presented recently to parliament,  Minister of Finance, Economic Planning and Development Joseph Mwanamvekha, said the tax will ensure that more people are motivated to contribute towards national building and government has a scope to improve service delivery.

Responding to 2019/20  National Budget  Statement Minister of Finance, Economic Planning and Development Jospeh Mwanamvekha delivered in Parliament,  MCP spokesperson on finance, Collins Kajawa, said introducing a 1% withholding tax on all mobile money transactions is not only retrogressive but militates against the country’s final inclusion agenda and punishes the very people government ought to protect and include.

“The justification for this tax measure that we have to a large number of the citizenry to contribute towards national building is misplaced because the biggest way to motivate them is to ensure that we protect them and allow them to graduate from poverty and not overburden an already vulnerable class of our population with further taxes. We propose that this tax measure should be reversed,” said Kajawa.

On his part, UDF spokesperson of finance, Ishmael Nkumba, also voiced concern that the tax will threaten financial inclusion because mobile money operators will raise the cost of transactions.

“The UDF  is also against introduction of 1.0℅ withholding tax on mobile money transaction,” he said.

Nkumba said the tax is a burden on the poor the majority of which use mobile money transaction. The party urges government to find other means of revenue generation.

Chairperson of the Budget and Finance Committee of Parliament, Sosten Gwengwe, said the tax “defeats the whole idea of financial inclusion”.

“Why should people merely pay for transacting,” Gwengwe said.

Justifying the introduction of the tax, Minister of Finance, Economic Planning and Development Joseph Mwanamvekha told Parliament that the tax will ensurethat more people are motivated to contribute towards national building through payment of taxes and ensure that government has scope to improve service delivery.

But a law lecturer at the University of Malawi’s Chancellor College Sunduzwayo Madise said the tax will disempower the unbanked and underbanked, and said it seems as if the government has changed or abandoned its agenda.

Madise was quoted by local press saying “on one hand, mobile money service was touted by the government as a solution to empower rural people but on the other hand, the system has now decided to plot against the very people it should empower and will take from them the little that they have and fill up the tax purse.”

Consumer Association of Malawi (CAMA) executive director John Kapito also  said the tax is a ‘war against the poor’.

“This is an insult that has come in this budget, which as consumers, we feel it is targeted at punishing the most vulnerable groups who are mostly in rural areas doing small businesses,” he said.

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.

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