Bankers, Finance ministry to discuss money transfer tax

BY THE GUARDIAN REPORTER

9th August 2013

TBA chairman, Dr Charles Kimei

The Tanzania Bankers Association (TBA) will soon meet senior officials from the Ministry of Finance to discuss the newly introduced excise duty on money transfer through banks, which has raised concerns among players.

According to the TBA chairman Dr Charles Kimei, a letter has already been issued, requesting for a meeting between officials of TBA and the ministry.

“TBA has written the Minister for Finance asking for a meeting with the banks to discuss the new tax including matters on which we have sought clarification such as the possible impact of the tax on the country’s economy,” he said in a statement released yesterday.

The Finance Act 2013 (Gazette Notice No 27 Vol 94 dated July 5th) as enacted by Parliament states “…there shall be charged an excise duty on money transfer through a bank, a financial institution or a telecommunication company at the rate of 0.15 percent of the amount transferred for the amount exceeding 30,000/- …” and that “the excise duty chargeable shall not apply to money transfer between banks and financial institutions, government, diplomats and diplomatic missions.”
This charge was neither announced in this year’s budget speech nor included in the proposed Finance Bill. Subsequently, it was introduced as an amendment to the Act.

TBA said it believed that the introduction of such a duty would bring a lot of implications to the government and individuals.

The association said it first became aware of the charge following a communication dated 16 July 2013 from the Tanzania Revenue Authority (TRA) advising TBA members of the new requirement.

According to the statement, the association believes that the duty will have a negative impact on the country’s financial deepening agenda.

Financial inclusion stands at below 12 percent of the population with banking access. Banks have embarked on a financial inclusion agenda to bridge the gap between the banked and the unbanked society by coming up with products that promote the usage electronic/telecommunication services.

The increased costs associated with the introduction of this tax will have a negative impact on the country’s financial deepening agenda.

The other implication is increased costs for bank customers whereby it expected that the cost burden of this tax will be passed to consumers by increasing the fees charged for the services provided.

“This cost will affect all banks customers whether individuals or businesses. For businesses this will mean an increase in the cost of doing business, which ultimately will have to be funded by the consumers as businesses will simply pass the increased cost on to them,” he said.

The duty will lead to increased cost of imports which will adversely affect the costs of procuring goods and services from overseas.

The association said it will also have negative impact on foreign direct Investment and will also adversely affect foreign investors in relation to remittances of dividends, capital, family maintenance and up-keeping.

It said the change will encourage the use of cash to avoid the costs associated with the new charge. This will have several adverse consequences including the risk of fraud and operational risk.

It is anticipated that the duty will led to additional taxation which the association is concerned that money transfers arise out of already taxed incomes and the introduction of excise duty implies additional taxation.

TBA warns that in the event that the government does not positively consider their petition, then apart from other existing transfer charges, customers will be subjected to an extra charge of excise duty for all money transfers exceeding 30,000/- or equivalent in foreign currency, to take effect from July 1, 2013. 

SOURCE: THE GUARDIAN