Malawi abandoned plans to introduce a 1% withholding tax on mobile-money transactions after criticism from the country’s main operator, lawmakers and a consumer-rights organization.
Finance Minister Joseph Mwanamvekha, who proposed the proposed levy in his budget speech last month, told lawmakers Monday the government will now seek to introduce a 20% withholding tax on interest earned by trust funds that mobile companies set up to finance social programs.
The mobile tax drew criticism from Telekom Networks Malawi Plc, the country’s biggest phone operator. Chief Executive Officer Michiel Buitelaar wrote to Mwanamvekha, noting the tax would increase the cost of mobile-money transactions by 25% and stifle financial inclusion, the Nyasa Times reported, citing the letter.
The Consumer Association of Malawi Executive Director John Kapito said the tax would hit the poor hardest.
Mobile-money transactions increased by 8.2% to 7 million in the 3 months through June, according to a report by the Reserve Bank of Malawi, while the value rose 39% to 1 billion kwacha ($1.4 million).
Reporting by Frank Jomo for Bloomberg