Cameroon introduces 0.2% levy on Mobile Money Transactions

Cameroonians’ new year celebrations have so far coincided with opposition to the Paul Biya administration’s new tax on mobile money transactions.

A 0.2 percent tax on money transfers and withdrawals via mobile wallets went into effect on January 1, 2022, as required by the newly enacted 2022 Finance Bill, which President Biya signed last November.

The tax applies to all transactions made via traceable platforms, including mobile phones and the internet, with the exception of bank transfers and electronic transactions used to pay taxes and customs duties.

In other words, people who use money transfer platforms will be charged an additional 0.2 percent when sending money and 0.2 percent when withdrawing money. This means that a total of 4,000 XAF ($7) in taxes will be levied on a transfer of 1 million XAF ($1,725) between two Cameroonians.

These taxes, which are expected to increase liquidity in state coffers, are in addition to existing charges on mobile money transactions in Cameroon, about which users have already complained.

Mobile money is extremely popular among Cameroon’s 26.5 million people, especially among the unbanked, middle- and lower-class citizens, and small business owners.

In Cameroon, only one-third of adults, or 35%, are estimated to have bank accounts, whereas mobile phone penetration has increased over time. As a result, network operators, led by MTN and Orange, have used existing mobile infrastructure to provide financial services to their subscribers.

According to data from the Bank of Central African States, Cameroon accounted for 65 percent (19.5 million) of the total active mobile wallets in the CEMAC regional zone as of 2020. (BEAC).

Transaction costs have risen in recent years in tandem with rising adoption. To send or withdraw 100,000 XAF ($172), for example, a user must pay nearly 2% (1,800 XAF, $3) in fees to the operator, who remits a portion of that to the government as value-added tax.

Many Cameroonians believe that yet another mobile money tax is unjust, particularly for the poorest and least-banked segments of the population, and have taken to social media to express their displeasure. Over the last week, the trending hashtag #endmobilemoneytax has been making the rounds on Twitter.

“Can you imagine being charged a tax to withdraw your own cash out of your account?” Rebecca Enonchong, a leader in the African tech ecosystem and one of the key voices against the new tax wrote in a tweet on January 2. “This tax is regressive and will slow financial inclusion. #EndMobileMoneyTax. #WeSayNo.”

According to a Douala-based entrepreneur who requested anonymity, the tax is an additional cost burden on the average Cameroonian and may discourage the use of mobile money.

“It’s essentially double taxation,” she explained, “which means the average person will pay more when sending and/or withdrawing money.” “The impact on business owners like me will be even more severe.” I may have to look for other options.”

Across Africa, the success of mobile money services has piqued the interest of governments seeking to broaden their revenue base, and new taxes are frequently imposed without considering their full impact.

A GSMA report found that taxation was harming the uptake of mobile money services and businesses in countries where such taxes had been implemented. According to a later study, many mobile money users belong to “marginalized societal groups,” so mobile money taxes have a significant negative impact on financial inclusion and broader development goals.

These taxes have a negative impact on the overall economy and government coffers by causing a contraction in mobile money transaction values and a reduction in their growth trajectory, with negative implications for overall corporate income and value-added taxes.

Within the region, lawmakers are still debating Ghana’s finance ministry’s plan to impose a 1.75 percent levy on electronic transactions in the 2022 budget. This is in addition to a previous move to raise taxes on mobile money agents. Similarly, a 1% tax on mobile money transactions in Uganda was reduced in half following protests.

In contrast to Ghana, citizens in Cameroon were barely informed of the details before the government implemented the new mobile money tax in November, according to local media reports.

The government has so far ignored the outrage, but some Cameroonians are hoping that authorities will listen to their complaints and reconsider the decision, as happened in Tanzania, where the government reduced a new mobile money tax by 30% after citizen protests. “Knowing our government, all we can hope for now is a review of the law,” the entrepreneur said.