Mobile Money Transfer Tax In Detail- A Good or Bad Strategy

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Mobile Money Transfer Tax In Detail- A Good or Bad Strategy

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What Is the Tax About?

On January 1, Cameroon’s government unveiled a new 0.2% tax on mobile money transactions under a new 2022 tax bill that has reportedly been signed into law by President Paul Biya. This tax has been met with sharp criticism , sparking the rise of an online campaign #EndMobileMoneyTax on social media platforms across the country.

“It’s a lazy tax because it’s easily collectable by using telcos and mobile transfer businesses to do tax collections on behalf of the government,” Rebecca Enonchong, the high-profile Cameroonian tech entrepreneur and advocate, told Rest of World.

The Finance Law of 2022 says that 0.2% tax shall be applied on transfers “OR” withdrawn (see section 228 d). Worth nothing is the fact that the law says “or” NOT “and”.

Why Is This Important?

From January 1st 2022, a tax of 0.2% has been applied to “all” electronic transfers “and” withdrawals instead of applying the tax either on transfers “or” withdrawals as the law states.  Therefore, it is outright double taxation!

Again, this tax does not only apply to mobile money transfers and withdrawals. It applies to all electronic transfers that leave a trace (Express Union, Western Union etc.) with the exception for bank transfers and withdrawals and transfers for the payment of taxes (See sec 228 b).

How does this tax work?

For any transfer and withdrawal made, you inevitably pay a 0.2% of that amount as tax. This tax is hidden in transfer and withdrawal fees such that you as a consumer will hardly notice.

Illustration

When Lolu sends 10,000frs to me for dinner, she will now pay an additional 20frs as tax. Therefore, her transfer fees will be 70frs instead of 50frs before the tax became effective. For me to withdraw the 10,000frs sent for dinner, I will pay 195frs instead of 175frs as withdrawal fees.

Incidence of Tax

This is actually an indirect tax whose incidence falls on the final consumer. The government charges MTN, Orange, Western Union, Express Union, Ria etc 0.2% of any amount debited or credited via their channels. These companies in turn raise the fees. The end users then bear the burden. Therefore, the effective rate is 0.4%.

What is the Effect of this Tax on a Macro Scale?

It is a double taxation system which only goes to hurt the poorer masses.

The greater effect of this is felt especially with huge sums. For example, for every 100000frs withdrawn through MTN Mobile Money, the charges shall be 2000frs.

It will deter Fintech (Financial Technology) companies from innovative money transfer systems.

It is a deterrent to fluidity of cash.

Mobile money has brought lower-income and rural communities into the financial system. New taxes could push them back out.

What is the Way Forward?

The tax should be repealed.

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