Taxing sim card use at Sh1000 per month is negative as it taxes most intensely the poorest sections of society, which is contrary to due diligence in taxation practices, a tax expert with the Economic and Social Research Foundation (ESRF) has affirmed.
Atromius Mbilinyi, a taxation professional and researcher with the foundation, made the remarks as the Treasury announced that it had suspended the tax measure, instituted by parliamentary pressure during the Budget session in April-June.
The Treasury took the step after President Jakaya Kikwete directed Treasury and the Ministry of Communications, Science and Technology to liaise with the service providers to sort out complaints about applying excise duty to sim cards.
Finance Minister Dr William Mgimwa emphasised following a meeting with service providers that it is MPs who instituted the tax so as to add to budgetary funds for various priority areas.
Now, it is mostly likely that the government will revisit its decision by reviewing the Finance Bill 2013 that was passed in Parliament a month ago.
“Taxation principles require every one to be taxed according to his or her means of income, implying that high income earners should pay more tax compared to low income earners,” Mbilinyi said..
A negative tax is one which is regressive, a taxation arrangement that takes a larger percentage of lower-income earnings and a smaller percentage of higher incomes.
The researchers have proposed the new method of charging mobile which is under taxation principles and will not hurt low earners.
In the 2013/2014 budget, the government placed a Sh.1, 000 monthly tax liability on the use of mobile phones so as to collect Sh. 178bn from 22 million holders of sim cards.
Mbilinyi said the government will not meet its plan of collecting that amount as about eight million sim card holders use less than Sh1000 to recharge their mobile phones each month, eliminating 36 per cent of registered sim card users from routine recharging of such phones.
Collecting taxes by using airtime topping up is a better method and would collect greater tax amounts, the researcher noted, challenging the government t o find a technology which will help them to monitor air time sold by mobile operators, thus ensuring that relevant taxes are properly paid.
Mobile phone operators who spoke to the Guardian on Sunday this week stated that excise would make them lose customers as rural customers will be hardest hit. Most of them only marginally buy airtime vouchers
There are customers who stay for three months without buying airtime voucher while some are unable to make calls and instead rely on beeping, which eliminates their being able to pay a monthly fee of Sh. 1,000 as tax.
A Vodacom official said that 48 percent of the total country’s population use mobile phone, about 22 million where eight million buy airtime vouchers and make calls. The tax measure would lead to deregistering close to 14 million subscribers,, representing a huge loss to mobile phone firms.
On Tuesday this week, President Jakaya Kikwete directed telecom firms, the Treasury and the Ministry of Communication, Science and Technology to resolve the on-going wrangle.
He directed experts from the ministries and the Mobile Operators Association of Tanzania (MOAT) to look for a solution on how to settle the Sh. 178 billion gap is that excise tax is scrapped.
The President noted that, it was impossible to drop the tax without finding optional sources of revenues to cover the deficit in the budget and the finance Act that has already been enacted.
MOAT spokesperson Sylvia Balwire declined comment when contacted on Thursday, and instead she sent a message which was relayed by an unidentified lady at a customer care counter in her office who told this reporter to contact the State House.
Meanwhile, a survey by The Guardian with the five mobile phone companies indicated that none of the firms had started implementing the deductions to meet excise tax remittances per month to the Tanzania Revenue Authority (TRA), which would be Sh. 33.40 per day of airtime or accumulated airtime liability. The surveyed firms are Vodacom, Zantel, Tigo, Airtel and TTCL Mobile.