On the back of an envelope: Tanzania’s #NoSimCardTax mess

sim card

It’s a tiny little thing, just 2.5cm long, 1.5cm wide and a millimeter thick. And yet it has found itself at the centre of a political storm in Tanzania. I’m talking, of course, about mobile phone sim cards.*

In case you missed it, the Tanzanian budget, passed last month by parliament, included provision for some new taxes, most notably a tax on mobile phone sim cards. It’s set at TZS 1,000/- (around $0.60) per month. And it’s in a mess.

It’s been in a mess right from the beginning. Originally proposed by the new and powerful parliamentary budget committee, under the chairmanship of Andrew Chenge, it was then included in the budget speech given by the Finance Minister, Dr William Mgimwa, to parliament. But Dr Mgimwa then instructed MPs to ignore the tax, saying the government had already decided to drop the idea, only for it to reappear before the crucial budget vote. 

Arguably it was in a mess even before it was passed. Tanzania has over 27m mobile phone subscribers (pdf), of which the mobile phone networks tell us around 8m spend less than 1,000/- per month on their phones. That rings true: I know a lot of people in Tanzania – particularly in rural areas – who have a phone mainly just so that they can receive calls. To a politician or businessman 1,000/- a month is almost nothing, but to these 8m people it’s a lot. As such it is a horribly regressive tax. Does the government really want to levy a pretty substantial tax on the poorest in society? This could potentially have the effect of forcing some of them to give up their phones – their lifelines.

I can see the attraction of the tax. It’s a very easy (and cheap) way of raising valuable revenue – all done electronically through a handful of companies. It could even, arguably, have a positive effect on governance and accountability: the connection between paying tax and feeling you have the right to hold government to account is widely recognised.

But now it’s a political mess. The tax is understandably unpopular, and Chadema are making the most of the opportunity – Zitto Kabwe and John Mnyika have been particularly vocal. Zitto points out that seating allowances paid to Ministers, MPs and government officials add up to around three times the projected revenue from the tax. Online, a lively Twitter campaign has emerged (#NoSimCardTax) and there are petitions on Jamii Forums and Avaaz. Offline, the newspaper cartoonists have been hard at work:

Even the government has given mixed messages. The Prime Minister, Mizengo Pinda, said that the tax was designed to benefit people in rural areas by providing a source of funds for much-needed rural electrification work. The Finance Minister (Mgimwa) and Budget Committee Chair (Chenge) have both defended it, and the government-owned Daily News newspaper argued that it was “an insult of the highest level to the citizens of this nation” to suggest it was unaffordable. But CCM officials also issued public statements against the tax, and earlier this week President Kikwete got involved, hosting a meeting of the mobile phone network operators and instructing the relevant ministries (Finance and Communications) to find an alternative way of raising the same revenue. 

The president referred to a particular amount, 178bn/-, as the hole that would be left by scrapping the tax. Where did that amount come from, I wondered, as I sat down with the back of an envelope to do some sums:

SimCardTax on the back of an envelope

#SimCardTax on the back of an envelope

There are 27m active sim cards in use in Tanzania, which would mean 27bn/- monthly revenue from the tax, or 324bn/- over a full year.

On the other hand, if the projected revenue is 178bn/- a year, that suggests that the government thinks the tax will only be paid on around 15m sim cards.

It doesn’t match, not by a long way. Even the numbers seem to be in a mess.

Perhaps the government thinks 12m people will abandon their sim cards in response to the tax. Some probably will, but surely nothing like as many as that. Or perhaps they think the cost of collecting the tax will be 146bn/-. I doubt if it would cost even 1bn/- to set up and maintain such a simple tax-collecting system.

How can the mess be sorted out? Well, my first thought was that a percentage-based tax on mobile phone credit would be much fairer to the poor, but Tanzania already has one, which was also increased in the budget, from 12.5% to 14.5%. It would have to be raised a lot further, to around 20%, to bring in the kind of revenue the government is looking for – that sounds unlikely [UPDATE: some more good ideas can be found here (pdf)]. But whatever is to be done, it would be good if they could do it with numbers that add up.

Finally, perhaps something good has come of all this. The show of strength from online activism has been good to see. But more than that, perhaps we’re seeing signs that a proper, inclusive debate on tax policy is possible in Tanzania. It used to be discussed only by a small elite, now it’s being hotly debated by everybody. Messy or not, that’s got to be a good thing.

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* Ok, so last time I posted, I said that enough had already been said about the sim card tax. I changed my mind.