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More African countries are looking to tax mobile money transactions

Taxation on mobile phone-based transactions and on airtime has been introduced in Kenya and is spreading to other African countries. Some countries in sub-Saharan Africa view mobile phones as a booming subsector easy to tax due to the increasing turnover of transactions and the formal nature of such transactions by both formal and informal enterprises. The increasing tax burden on the subsector and the consumers, though, has raised concerns that the massive gains made in financial inclusion in developing countries made possible by retail electronic payments platform via mobile phone transactions may be reversed—resulting in a return to cash transactions. In addition to a 2003 excise tax on airtime, since 2013, Kenya has introduced and reworked taxes on goods such as mobile phones, computer hardware, software, and, more recently, retail financial transactions. The most recent adjustments in taxation in the Finance Act 2018 increased the excise tax on money transfer services by banks from 10 percent to 20 percent, on telephone services (airtime) from 10 percent to 15 percent, on mobile phone-based financial transactions from 10 percent to 12 percent, and introduced a 15 percent excise tax on internet data services and fixed-line telephone services.


Now there’s also a growing trend of governments looking to their fastest-growing sector of the past two decades: the mobile phone industry.


In most countries, phone companies and mobile operators already pay taxes. The more recent trend is to initiate or raise specific mobile consumer taxes—particularly for devices and transactions.


Just over a year ago, Uganda’s regulators introduced a so-called social media tax and a levy on mobile money transactions. Uganda is not alone: Industry research from 2017 shows up to 26% of the taxes paid in the mobile industry in 12 Sub-Saharan countries were industry-specific.


Kenya, often highlighted as the leading light of mobile money sector, has also been increasing taxes on transactions and on airtime use, which can result in double taxation—you can’t have a mobile money transaction without already having paid for airtime.


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