Sim card tax to stay: ruling

Dar es Salaam. Leading mobile phone companies and 37 banks suffered a big blow yesterday after a tax tribunal dismissed their appeal challenging a Sh1,000 monthly sim card tax and a 0.15 per cent deduction on money transfer services.

The Tax Revenue Appeals Board (Trab) said the suits by the mobile phone companies and banks were lacking not only in law but also in facts and evidence to support their claims.

The decision brings to an end a raging debate as to who between the telephone companies and their subscribers is legally required to pay the tax. “It is the telecommunication companies who are saddled with the responsibility to pay the newly-introduced duty on sim cards,” Trab said. “The board cannot reframe the law and impose excise duty on telecommunication subscribers.”

According to the board, mobile phone companies cannot escape liability for paying the tax as the law is clear that the companies have a legal obligation to pay up and not their subscribers. The decision means the taxman can start charging the suspended tax together with accrued interest from cellphone companies.

The new tax, which was to take effect on July 1, also applies to banks. They are required to retain 0.15 per cent for any amount exceeding Sh30,000 excluding money transfers involving banks, salaries and government and diplomatic transactions.

The taxman wrote to the banks in September warning them of undisclosed penalties should they fail to impose the 0.15 per cent excise duty on money transfer services.

On September 12, the taxman gave the mobile phone companies a 14-day ultimatum to remit Sh6.3 billion, including accrued interest on excise duty on sim cards for the month of July, short of which they would be penalised.

In October,Trab ordered TRA to suspend collection of the new tax pending hearing and determination of an appeal by the banks and the cellphone companies that opposed the tax.

In its latest decision, Trab said opposition to the sim card tax was guided by a misinterpretation of the law. MIC Tanzania Limited, Airtel, Vodacom and Tanzania Telecommunications Company Limited (TTCL) challenged the tax that was introduced by Parliament via amendments to the Finance Act.

The tax on money transfer services was also introduced in a similar manner. The companies argued that the law did not provide for a modality to collect and deduct the tax and they had been turned into collecting agents for TRA. The companies also contended that the new sim card tax amounted to double taxation.

In its decision, though, Trab said it is the mobile phone companies that are responsible for paying the new tax as the law stands.

“The appellant’s contention that the law does not provide for a modality for collecting and deducting duty from their subscribers has no basis in law,” said the board, which also concluded that there was no evidence to show that TRA has levied excise duty twice on every sim card, as the mobile phone firms claimed.

“Payment of excise duty by the appellants on a monthly basis does not necessarily translate into double taxation under the law,” said Trab.

The banks claim that the newly-introduced law lacked specific operational regulations that would iron out all difficulties and technicalities involved in financial transactions.

They also wanted the law to provide clear guidance on the accounting methods and payment of the excise duty before they complied and added that there was confusion in terms of verification and discharge of the tax.

The banks argued that they could not effect the new tax because it did not clearly define the scope of the excise duty, including what constituted “transfer” and “money transfer services”.

According to the banks, either the government or TRA had ignored their earlier appeal for guidance on the smooth execution of the tax before TRA could begin imposing penalties. But Trab said in its ruling it was satisfied that TRA was not obliged by law to issue the regulations and guidance requested by the banks.

“That is the exclusive role of the legislature and the respondent cannot be saddled with more responsibilities and made to perform the functions of the legislature,” said Trab. “We hold a strong view that still they (banks) can do their utmost to find some way and proceed to comply with the new law to get the whole process on track.”

The board added that it could not allow the exercise to be bogged down in a legal quagmire that threatens to hijack the collection of government revenue--which it declared long overdue.

THE CITIZEN TANZANIA: