Madam Speaker, Government has
introduced a 1.0 percent final Withholding Tax on non-bank mobile money
transactions based on the transaction amount. This measure aims at ensuring
that a large number of the citizenry are motivated to contribute toward
national building through payment of taxes and ensure that Government has scope
to improve service delivery. This Madam Speaker is in line with developments in
neighbouring countries.[1]
As a way of background, the
mobile money service is offered by private entities, mobile network operators
(MNOs). These MNOs are primarily in the telecommunication business and offer
mobile money as an “added service.” There are two local mobile money services
in Malawi, khusa m’manja[2] or Airtel Money offered by
Airtel or (TNM) Mpamba[3]
offered by TNM. It may therefore be argued that since mobile money is not
public or state issued money, it is amenable to levies or taxes like other
services.[4] To put matters in context,
mobile money is an emerging form of money which uses a digital or electronic
form. It is not state-issued money (also called fiat money) because it is
created by mobile money operators. It is therefore private money. However,
because it has a one-to-one ratio with fiat money, and is issued in exchange of
fiat money, it serves as a mirror of fiat money. Although not regulated as
money, it is nonetheless regulated as an electronic means of payment. It must
however be pointed that mobile money is not pseudo money, it is actual money,
but only manifested in digital format. Although not legal tender, with increased
use, mobile money has steadily gained status as a trusted means of social
tender.
Mobile money is a service
that has grown exponentially, since its introduction, less than a decade ago,
piggybacking on the equally phenomenal growth of mobile phone usage since its
introduction in 1995.[5] It is therefore no
surprise that it may have caught the eye of the fiscus as a source of tax revenue. Indeed, it is not unusual to
subject most services which are offered to the public to tax. The Minister’s
budget statement seems to attest top this. However, for mobile money, this
seems incongruent with the government’s own financial inclusion agenda. The
current financial inclusion in Malawi has traditionally been based on the
opening of a bank account. Elsewhere I have argued for a redefinition of the
financial inclusion matrix.[6] I have argued that this
definition of financial inclusion is elitist and ignores the reality of the
Malawian economy. The central bank has since the advent of mobile money,
targeted it as one of the means of attaining financial inclusion, especially by
those who do not have bank accounts. This targeted group accounts for a great
deal of the rural based population. This shift in approach rides on the fact
that one does not need to have a bank account to “open” a mobile money account.
It is this radical change that has made mobile money a game-changer.
To sum it all, the mobile
money service was seen as a god-send to redefine the financial inclusion landscape.
Compared to other money transfer and remittance services, mobile money is relative
cheap, less onerous and instantaneous. Initially, one was only limited to transact
on a single platform. As such one had to register for both Mpamba and Airtel Money to transact on broth platforms. Now there
is interoperability, including with bank accounts allowing transfers to be done
with ease, subject to transactional fees. That is why the introduction of the
1% tax goes against conventional wisdom. What this means is that instead of
using mobile money services as a means to empower the rural masses and the unbanked
or under-banked, the tax will now serve to disempower them. The cost of
transacting on the mobile money platform will rise. Unfortunately this tax is
of general application and will apply to all mobile money transactions
regardless of the status of the user of the service. Just to put it in context,
imagine paying an extra 1% of the value for all bank transfers, or all payments
made on mobile banking platforms. This is how it will feel to those who do not
have bank accounts. So with one hand the mobile money service was touted as a
solution to empower the rural people but with another 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. Imagine this scenario if you can. Two middle class people who want to
remit money to each other through a bank account do not have to pay any tax.
However, two villagers who wish to remit money to each other using the mobile money
platform have to pay 1% levy on top of transactional fees! Define irony, if you
will. The statement that the 1% tax is what is obtaining in neighbouring countries also needs fact-checking. So far, a search on Google reveals that only Uganda imposed this tax, and has already renegaded with mixed messages.
It therefore begs the
question whether during the MNOs, micro-finance networks, the Consumers
Association of Malawi and the Reserve Bank were consulted. Or has the agenda to
use mobile money as tool to get more Malawian on the financial bandwagon been abandoned,
even before the station master has blown his whistle?
[1]
Paragraph 146 of the 2019/20 Budget Statement
[2] Colloquial
meaning “money in the hands”
[3] Colloquial
meaning money but also used to refer to start-up capital
[4] For
a discussion of money, see chapter 3 of Madise
S (2019) Regulation of Mobile Money – the
case of Sub-Saharan Africa (Palgrave e Macmillan) https://www.palgrave.com/gp/book/9783030138301
(11 September 2019)
[5]
Madise S (2014) “Payment Systems and Mobile Money in Malawi: Towards Financial
Inclusion and Financial Integrity” SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2531319
(11 September 2019)
[6]
Madise (2014) & Madise (2019).
