UN study says digital payments to boost revenue by about US$500m annua

21Sep 2016
Prosper Makene
The Guardian
UN study says digital payments to boost revenue by about US$500m annua

DIGITAL payments in the country could boost tax revenue by nearly US$500 million each year and drive economic modernisation in the country.

Sheru Hadha, a Tanzanian customer, notes how digital financial inclusion has empowered her in her daily life.

A United Nations study illustrates how the private and public sector can work together to modernise economies, improve transparency and support financial inclusion and growth.

The study titled conducted by Better than Cash Alliance provides findings about potential gains for governments, businesses and citizens when digitizing payments.

It underscores that digitizing Value Added Tax payments and supporting formalisation of businesses could increase tax revenue in the country by at least US$477 million per year.

The study also said that many emerging economies are grappling with how to modernise their economies, improve transparency, drive sustainable growth and advance financial inclusion.

The Study pointed out that digital payments increased transparency between citizens and governments, by digitizing tax payments which has provided electronic proof of payments and protects people against fraud.

“This study on Tanzania’s digital payment initiatives reveals the very strong results achieved by the government so far. By digitizing the payments which businesses and people make to the government, it will curb theft and fraud,” the report stressed.

Tanzania has already modernized its tourism sector by reducing economic leakage from cash payments by digitizing things like conservation park entry fees by over 40 percent which supports investment creates jobs.

The study added: “Digital payments cut bureaucratic inefficiencies in Tanzania, including reducing import customs clearance time from nine days to less than one day.”

Dr Ruth Goodwin-Groen, Managing Director of the Better than Cash Alliance comment which worked with the UN to come up with the report said Tanzania’s results in driving the shift from cash to digital payments are very impressive.

“The country has developed significant experience that has led to gains in revenue at double digit rates while also delivering social benefits for its citizens.”

She noted that Tanzania is building a firm foundation for strong and inclusive growth which looks forward to further progress.

The study also provides important insights on how further expanding digitization of payments in Tanzania can fast-track the country’s economic modernization.

Furthermore, these digitization efforts contribute to benefits beyond just the economy.
Sheru Hadha, a Tanzanian customer noted how digital financial inclusion has empowered her in her daily life. “Digital payments help women be more independent. Before, when we just had cash, it was very tough,” Hadha said.

“To transfer money, I had to go to the bank, and they would ask me for a lot of information and require documentation. I had to line up for a long time, more than three hours. It was a big hassle,” she noted.

Other countries in the region have initiatives to digitize payments and, while many are in the early stages of their transition, the benefits are quickly being realised and becoming evident.
Kenya is targeting to double tax collections over the next three years through its tax filing electronic system, the iTax.

In Uganda, the Kampala Capital City Authority’s automated tax collection system boosted revenue by 167 percent in a single year.

Rwanda drove nearly 80 percent adoption of electronic VAT payments made by Small and Medium Sized Enterprises.