Finance and Planning Minister Dr. Mwigulu Nchemba discusses mobile telephony transaction charges in Dar es Salaam, in July 2021, accompanied by former Communications and Information Technology Minister Dr. Faustine Ndugulile. Photo: Courtesy
Tanzania’s Finance Bill 2024: Public Input Essential to Avoid Kenya’s Finance Bill Chaos
By Adonis Byemelwa
The Permanent Committee of Parliament on Budget is set to gather stakeholders’ views on the Finance Bill, 2024, a move crucial for avoiding the chaos witnessed in Kenya over its Finance Bill. Public hearings will run from Sunday, June 23, 2024, to Tuesday, June 25, 2024, starting at 4:00 AM at the Pius Msekwa Hall, Parliament Offices in Dodoma, as per Section 97(2) of the Standing Orders of Parliament, February 2023 edition.
All stakeholders are invited to present their views on the Bill. Written opinions can be mailed or emailed, with the Bill available for download at www.bunge.go.tz. This is a critical opportunity for the public to influence a bill that could shape Tanzania’s economic future.
In a significant development, Tanzania has slashed a controversial levy on mobile money transactions by 43%.
This decision substantially relieves millions who face burdensome costs when sending or receiving money via mobile phones. The levy, introduced a year ago, had sparked widespread public outcry and legal challenges, notably from the Legal and Human Rights Centre (LHRC), which sued the government over the levy.
Finance Minister Mwigulu Nchemba, presenting the annual budget for the 2022-23 financial year, explained that the levy reduction aims to ease the cost of living for Tanzanians amidst economic challenges.
“I propose an amendment to the national payment system…by reducing the mobile money transaction levy on sending and withdrawing money from a maximum of 7,000 Tanzanian shillings ($3) to 4,000 ($1.72) on each transaction,” Nchemba stated. However, there are calls for the complete removal of the levy to support economic activities further and reduce the financial burden on citizens and businesses.
Local reactions have been overwhelmingly positive. Daudi Kweka, a Dar es Salaam resident, praised the government’s decision, emphasizing how high transaction costs had discouraged mobile money use.
Mobile money agents, like Fatma Hassan, hope to regain lost customers and business stability following the levy reduction. “This tax was a big setback. I lost my customers and struggled to pay the rent. I hope the situation will change soon,” Hassan said.
The controversy surrounding the mobile money levy sheds light on broader economic policy issues and public participation in legislative processes. Tanzania can learn valuable lessons from Kenya’s recent chaos over its Finance Bill, 2024.
In Kenya, the Finance Bill ignited widespread protests led by Gen Z, resulting in violent clashes with police and significant property damage. Despite intense opposition and ongoing protests, the bill passed its second reading, highlighting a disconnect between the government and the public.
Kenyans protest controversial finance bill taxing essential commodities amid economic slowdown; police use tear gas but fail to disperse rioting crowds. Photo: Courtesy
Kenya’s experience underscores the importance of transparent and inclusive legislative processes. The protests in Nairobi, marked by tear gas and confrontations between demonstrators and police, illustrate the potential consequences of ignoring public opinion and pushing through controversial legislation without adequate stakeholder engagement.
Prominent Tanzanian economists, such as the late Prof. Honest Ngowi and Prof. Samuel Wangwe, have long criticized such levies. Prof. Ngowi, a respected former economics professor, vocally opposed the phone levies, arguing they disproportionately hurt the poor and stifle economic activity.
Prof. Wangwe, a former CEO of the Research on Poverty Alleviation and an esteemed economics guru, echoed these sentiments, highlighting that excessive taxation on mobile transactions undermines financial inclusion efforts and burdens small businesses.
“The levy is detrimental to the digital and financial gains the country made over the years,” said Desderius Asante, a telecom sector proprietor.
“When we have the right policy and clear regulatory conditions in place, mobile money will almost certainly become the backbone of payment in the digital economy,” he added.
The turmoil in Kenya offers a cautionary tale for Tanzania. As Tanzanian lawmakers prepare to debate the Finance Bill, they should consider the potential repercussions of ignoring public sentiment.
Finance Minister Dr. Mwigulu Nchemba’s controversial remark suggesting that those unhappy with the levies should relocate to Burundi could exacerbate public frustration and ignite further unrest. Instead, a more constructive approach would involve engaging stakeholders to address their concerns and build consensus on economic policies.
The Finance Bill, 2024, represents a critical juncture for Tanzania. Stakeholders from all sectors are encouraged to participate in the upcoming public hearings, ensuring their voices are heard.
The Bill’s progression will be closely watched, with citizens hoping for outcomes that promote economic growth and stability.
Tanzania’s mobile money sector has been a key driver of socioeconomic growth, creating employment, driving business productivity, facilitating investments, and contributing to economic formalization.
Mobile money services, particularly among underserved populations such as women and rural residents, have transformed financial inclusion.
From 2009 to 2017, the use of mobile transactions pushed the percentage of Tanzanians using formal financial services from 16% to 65%, making Tanzania a leader in the East African market with 44% of adults accessing banking through these services.
However, the introduction of the mobile money levy threatened these gains. Evidence suggests that most Tanzanians were turning away from mobile money services due to the levy.
“The only mistake the government should avoid is to impose a tax on mobile money transactions because doing so will have a multiplier effect and cause an unnecessary increase in the cost of living for many people,” Asante noted.
As Tanzania moves forward with the Finance Bill, 2024, it is crucial to heed the lessons from Kenya. Ensuring a participatory and transparent legislative process can help navigate economic challenges more effectively and maintain social harmony.
By fostering an environment of collaboration and understanding, Tanzania can address public concerns, support economic activities, and uphold the gains made in financial inclusion and digital growth.
The Finance Bill, 2024, presents an opportunity for Tanzania to refine its economic policies and strengthen its legislative processes. The government must balance fiscal needs with the well-being of its citizens, promoting policies that enhance economic inclusion and growth.
Stakeholders preparing to voice their opinions provide the Tanzanian Parliament with a chance to demonstrate its commitment to transparent governance and responsive leadership, setting a positive precedent for future legislative endeavors.
However, common citizens question the necessity of imposing new levies, especially as Tanzania’s national debt surged to TSh 91.7 trillion by March 2024, up from TSh 77 trillion the previous year—a 19.1 percent increase. This rise, as explained by Minister for Planning and Investment, Professor Kitila Mkumbo, is due to ongoing and new loans for development projects, including vital infrastructure.
