Dar es Salaam. Tanzania has introduced a digital service tax on non-resident service providers that operate in Tanzania. The new tax proposals were tabled today, June 14, 2022, by Minister of Finance and Planning Dr Mwigulu Nchemba in the readout of the national budget for the financial year 2022/2023.
“The ministry proposes a two percent tax rate of the transactions volume made to non resident digital service providers,” Mr Mwigulu told lawmakers in the capital Dodoma. “This is to expand the tax base in the principle of fairness and equity of the tax system.”
The proposal comes a year and three months since the government hinted at introducing Digital Service Tax to big tech operating in Tanzania. In East Africa, Tanzania joins the like of Kenya which had introduced the tax in 2020, which is about 1.5 per cent of the gross transaction volume.
While Tanzania has been eyeing the digital environment as the new tax source, the latest mobile money transaction levy was received with a lot of criticism from the public.
Users even withdrew from the usage of mobile money services which made the government reduce the levy for the second time by 43 per cent in the 2022/2023 budget readout.
With the increasing tax burden on the crucial mobile money service, stakeholders were pushing for the government to look elsewhere for funding sources, especially from global companies that collect revenues in the country.
It’s yet to be clear how the scheme will operate, it’s expected, however, that this will be revealed in the coming weeks with the release of the Finance Act.
The proposal comes amidst efforts at the global level to re-structure the global tax system so as to enable governments to collect their fair share of taxes in a changing global economy.
The conversation on digital tax has been mainly spearheaded by the Organization for Economic Co-operation and Development (OECD), where a lot of negotiation power comes from big economies.
So far, several countries in Europe have introduced several instruments for the collection of digital taxes.