Let me start with a number that should stop every policymaker, development economist, and digital finance practitioner in the region in their tracks: 8.6 per cent.

That is the weighted-average cost of withdrawing cash from a mobile money account in Tanzania, expressed as a percentage of the transaction value. It is the highest figure in a 16-country global sample measured by the Innovations for Poverty Action Transaction Cost Index (Year Two, 2025). For context, the equivalent figure in Uganda is 4.4 per cent. In Kenya, roughly 2 per cent. In Ghana, Mali, and Peru, it sits at 1%.

Tanzania is not just the most expensive country in East Africa for mobile money access. It is the most expensive in the world, among those measured. And yet, against this backdrop, the government is now actively considering expanding the tax burden on mobile money services.

I have spent a long time watching the digital economy in Kenya and East Africa develop. I have seen mobile money transform livelihoods, enable small businesses, absorb economic shocks that would otherwise have devastated families, and pull millions of people into formal financial life for the first time. What is being proposed in Tanzania is not a minor fiscal adjustment. It is a direct intervention into the most consequential infrastructure for economic participation the country has ever built, and the evidence on what happens when you over-tax it is, frankly, damning.

The Achievement First: What Tanzania Has Actually Built

Before we talk about what is at risk, it is worth acknowledging how extraordinary Tanzania’s mobile money ecosystem is.

When mobile money first launched in Tanzania in 2008, fewer than nine per cent of Tanzanian adults held a bank account. By 2013, barely five years later, 90 per cent of adults had access to mobile financial services. By December 2025, the country had 76.47 million active mobile money accounts and recorded 1.85 billion transactions in just six months, according to the Tanzania Communications Regulatory Authority (TCRA). Mobile money now contributes an estimated 5 to 8 per cent of Tanzania’s GDP — one of the highest contribution rates in East Africa and well above the Sub-Saharan African average of 4.5 per cent.

What makes this even more striking is what it means for financial inclusion. FinScope Tanzania 2023 put financial inclusion at 76 per cent of adults. Fifty-four of those percentage points are attributable to mobile money, not to banks, not to microfinance, not to fintech apps, but to mobile money. The MNO-led agent network is the financial access infrastructure for the majority of Tanzanians, full stop.

This is the foundation upon which any conversation about mobile money taxation must rest. When we tax mobile money in Tanzania, we are not taxing a convenient add-on service available to people who have other options. We are taxing the only formal financial relationship most Tanzanians have.

The Current Burden: Already Among the Heaviest in the World

Here is the thing that often gets lost in the public discourse around this issue: Tanzania is not starting from a low-tax baseline.

According to industry data, Tanzania is currently the only country in East Africa that applies both VAT at 18 per cent and excise duty at 10 per cent to mobile money transaction fees simultaneously. The combined pre-levy tax rate on those fees approaches 30 per cent, a burden with no regional equivalent. Uganda and Kenya apply excise duty but have not extended VAT to mobile money provider charges. Tanzania has gone further than any of its neighbours, and it has done so on top of an already complex regulatory cost stack.

The cumulative picture is captured starkly in the PwC Tanzania Telecommunications Pre-Budget Newsletter, published in March 2026. Under current pricing, the effective tax rate on telecom services, accounting for excise duty, VAT, and associated levies, stands at 46.61 per cent per unit of consumer spend. The proposed reforms under discussion could meaningfully reduce this burden, but any increase in this burden would push Tanzania further into territory without a positive precedent anywhere in the region.

The ICTD Policy Brief 13 (Wales & Niesten, 2024) is direct on this point: the combination of excise duty and VAT in Tanzania creates an effective pre-levy tax rate that is “borne by final consumers of the services and traders not registered for VAT.” In practice, this means the burden falls heaviest on precisely the users mobile money was built to serve, low-income, rural, and infrequent transactors.

Tanzania’s Own Natural Experiment: The Data Does Not Lie

If there were genuine uncertainty about what happens when you raise transaction costs on mobile money in Tanzania, I might take a more cautious position. But Tanzania has already run this experiment, twice, in opposite directions, and the results are unambiguous.

July 2021, the e-levy introduction: When the Electronic Money Transfer and Withdrawal Levy was introduced on 1 July 2021, the market responded immediately and decisively. Peer-to-peer transaction volumes fell 38 per cent between June and August 2021. P2P transaction values dropped approximately 60 per cent, from TZS1.25 trillion to TZS500 billion, in a single month. Cash-out values fell 30 per cent. It took 13 months for P2P volumes to return to pre-levy levels; cash-out volumes had still not fully recovered as of March 2023.

More damning still: in 2022, the government collected approximately TZS 252 billion through the e-levy, but the mobile sector’s direct tax contribution simultaneously fell, partially offsetting those headline collections. The social cost in reduced financial inclusion, suppressed economic activity, and higher transaction costs for vulnerable users was entirely unaccounted for in the government’s revenue modelling.

July 2023, the reversal: When the Finance Act 2023 removed the levy on electronic transfers, the market’s response was equally immediate. By Q4 2023, mobile payment volumes had reached an all-time high of 500 million transactions per month, a figure that the Bank of Tanzania’s own reporting characterised as evidence of the positive results of government efforts to stimulate electronic payments.

Two natural experiments. Two clear results. Higher taxes suppress usage and reduce net revenues. Lower taxes restore activity and generate broader economic value. The causal mechanism is confirmed. There is no ambiguity left.

The Human Cost: Who Bears the Burden

Abstract percentage points and macroeconomic aggregates can obscure the real-world impact of these decisions. Let me be concrete about who gets hurt.

The levy structure in Tanzania is deeply regressive in practice. A consumer withdrawing a very small amount, say TZS 500 to TZS 1,000, the kind of transaction most common among low-income rural users, pays a proportion of transaction value in combined fees and taxes that can reach 35 per cent of the amount withdrawn. A consumer withdrawing TZS 500,000 pays around 2%. The architecture of the levy, a 22-band slab model with fixed absolute charges within each transaction band, imposes its sharpest burden precisely at the transaction sizes most associated with financial inclusion and poverty-level usage.

The World Bank (2025) has quantified this in the most direct possible terms: following the introduction of mobile money levies, rural Tanzanian households experienced declines of 10 to 18 per cent in food consumption. Not declines in digital payments volume. Declines in food consumption. When you price people out of the cheapest financial tool they have, they absorb the shock somewhere else in their lives.

And there is a further dimension that policymakers consistently overlook: the degradation of the agent network. High fees suppress transaction volumes; suppressed volumes starve agents of commission income; reduced income weakens agents’ incentive to maintain adequate float; inadequate float causes transaction failure. Analysis by the Innovation for Poverty Transaction Cost Index found that only one in three transaction attempts in Tanzania succeed on the first attempt, yielding an unconditional success rate of 65.5 per cent. In rural areas, that rate falls further. Every incremental increase in transaction costs accelerates this vicious cycle.

The Fiscal Paradox: Why More Taxes May Mean Less Revenue

This is the argument I want every Tanzanian policymaker to sit with. It is not just that more mobile money taxes hurt consumers. It is possible that more mobile money taxes may not even achieve the fiscal objective.

Tanzania’s own experience in 2021 demonstrated a partial crowding-out effect: direct telecom tax revenues fell even as the e-levy collected new receipts. The Zambian experience offers a more complete illustration: after Zambia doubled its mobile money levy in January 2025, MNO revenue growth stalled, and over six months, the government lost approximately twice as much in forgone corporate tax revenue as it gained from the levy itself.

ICTD Policy Brief 13 tracks the trajectory plainly: the levy’s contribution to total monthly tax revenues fell from 2.37 per cent in September 2021 to just 0.57 per cent by December 2023, even as the market continued to grow and absolute transaction volumes rose. The return on mobile money taxation, measured properly, is in long-term decline.

There is a stronger revenue case for the opposite approach. When merchants accept digital payments, transactions become traceable. Traceable transactions improve VAT compliance and income tax visibility. Analysis by the GSMA estimates that the indirect fiscal gains from formalisation and the broadening of the tax base through digitalisation exceed the direct excise revenue loss from lower transaction levies over a two- to three-year horizon. Tanzania is choosing the smaller, shorter-term number and forgoing the larger, longer-term one.

The Regional Mirror: What Rwanda and Kenya Show Us

Tanzania does not need to project forward into uncertainty. It can look to comparable markets for what they have demonstrated with lighter fiscal frameworks.

Kenya’s mobile money market, with a dominant provider, stronger scale economics, and a lighter overall tax architecture, generates approximately 280 transactions per active account per year. Tanzania’s equivalent figure is 97.9. That gap of roughly 180 transactions per user per year is the financial inclusion gap that a less burdened fiscal framework would close.

Rwanda is the more instructive comparison. By maintaining a policy environment that does not impose punitive levies on low-value digital transactions, Rwanda’s mobile money ecosystem reached 86 per cent of adults active, with digital payment adoption growing from 30 per cent to over 70 per cent in just four years, between 2020 and 2024. Rwanda’s trajectory demonstrates an important point: policy choices, not the underlying demographic or economic characteristics of a market, are the primary determinants of whether mobile money realises its financial inclusion potential.

The GSMA’s 2026 affordability research establishes an empirically derived threshold: levies exceeding 0.2 per cent of transaction values create significant and demonstrable downward pressure on affordability and usage. Tanzania’s effective total cost burden on cash-out transactions, already the highest in a 16-country global sample, is not in the same category as this threshold. It is in a category of its own.

The Path That Makes Sense

I understand that the Tanzanian government faces genuine revenue pressures and must find ways to broaden its fiscal base. That is a real constraint, and dismissing it achieves nothing. But the evidence, examined honestly, points to a clear conclusion: mobile money is the wrong place to look.

The more productive path is the one that multiple researchers, regulatory bodies, and regional governments have now articulated consistently. Introduce an exemption threshold for low-value transactions below TZS 10,000 to protect the rural poor, who are mobile money’s core constituency. Rationalize the EMCWL from a 22-band opaque slab structure toward the cleaner Ugandan single-rate model. Apply the same fiscal treatment to equivalent financial transactions, regardless of which type of provider delivers them, a principle of functional neutrality that does not currently exist in Tanzania’s framework. And invest in the digitalization of the tax base itself, which is the most powerful medium-term lever for domestic revenue mobilization available to any developing economy.

Tanzania built something genuinely remarkable with mobile money. The infrastructure, the agent network, the trust, and the depth of financial inclusion took decades of investment and enabling policy to construct. They are not robust to extraction. The evidence from Tanzania’s own recent history is unambiguous on that point.

The question is not whether the government can tax mobile money. It clearly can. The question is whether doing so makes fiscal, social, or economic sense. On all three dimensions, the evidence says no.