The Government of Malawi has rejected a proposal to tax mobile money transactions. Malawi changed its mind after harsh criticism on the proposed 1% tax on non-bank mobile money transactions.
Instead, the government is working toward introducing a 20% withholding tax on interest earned by trust funds created by mobile money companies. The Minister of Finance, Economic Planning, and Development states that the tax will finance social programs.
Last month, Minister Joseph Mwanamvekha suggested the 1% tax to motivate citizens towards nation-building. In his argument, the minister said that the fee would improve government service delivery.
However, mobile money companies opposed the suggestion, arguing that the tax will deter financial inclusion. At the same time, others posit that the levy would deter governments’ efforts to empower rural people.
For instance, the Consumer Association of Malawi Executive Director John Kapito saw the tax as 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,” John added.
Moreover, Telekom Networks Malawi Plc CEO noted that the tax would inflate mobile money costs by as much as 25%.
Use of mobile money in Malawi has grown with mobile money transactions increasing by 8.2 % to 7 million transactions in the second quarter of 2019. Furthermore, the Reserve bank of Malawi states that the value of the transactions rose by 39% to $1.4 million.