Tanzania telcos get reprieve from simcard tax

Tigo, one of the telecoms that went to court over the simcard tax.

President Jakaya Kikwete’s decision to strike out excise duty on simcards from the Finance Act 2013 created a $108.2 million hole in the budget, but handed telcos a much sought after breather.

The President endorsed the amendments to the Act which was passed by Parliament early this year under a certificate of emergency soon after the Tax Revenue Appeals Board dismissed the appeal challenging the tax.

Under the emergency certificate, a Bill bypasses all procedures including consultations with the cabinet and publishing it in at least two issues of the government Gazette within seven days.

The first publication of a Bill must contain its full text, and must be published at least 21 days before it is introduced in the National Assembly for the first reading.

Lawyer Beatus Malima said the law was a nonstarter as it sought to tax the investor instead of the consumer as intended by excise duties.

Mr Malima said having a simcard registered under a person’s name implies that the card is that person’s personal property and it would be unconstitutional to tax another over it.

“The law was taxing investors, in this case mobile phone operators, and it was wrong to tag it as excise duty, this law which was only to be available in Tanzania could have chased investors away,” he said.

The Act imposed a Tsh1,000 ($0.62) excise duty on simcards to be collected by mobile phone companies and submitted to the Tanzania Revenue Authority (TRA).

Mobile phone companies and banks appealed against this Act saying tax on all simcards will cut off eight million of the current subscribers whose expenditure on mobile communication is less than Tsh1,000 ($0.62) a month.

On December 13, the Tax Revenue Appeals Board dismissed the appeal challenging the simcard tax and 0.15 per cent deduction on transfers of over Tsh30,000 ($18.7). In its judgment, the Appeals Board said mobile phone companies and the banks were lacking not only in law but also in facts and evidence to support their claims.

Earlier, President Jakaya Kikwete had rejected the tax and constituted a committee to discuss it and come up with the alternative to revenue collection of up to Tsh178 billion ($111.2 million) annually, which is already budgeted for. Until the President struck it out, the committee had not come up with the solution.

On September 12, TRA gave mobile phone companies Vodacom, Tigo, Airtel, Zantel and TTCL, a 14-day ultimatum to remit the tax, which was due on July 1, or face penalties.

In reaction, the companies separately went to court and lodged injunctions with the Tax Revenue Appeals Boards, a move aimed at stopping TRA from collecting the tax.
As of 2012, only 17 per cent of the country’s adult population, equivalent to 3.7 million people, had access to formal financial services.

However, leveraging on mobile telephone technology with 30 million subscribers, close to 43 per cent, equivalent to 9.3 million adults as of September this year have active mobile payment accounts.

If implemented the tax could have thrown into limbo the government’s plan to have half of the adult population access formal financial services by 2016.