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Kenya telecoms operators reject money tax

Kenya’s telecoms operators have expressed disappointment at government’s intention to increase excise tax on mobile money transactions, arguing that the move will hurt the poor most and undo most of the gains made in promoting a cash lite economy.

The operators were reacting to Treasury secretary Henry Rotich’s announcement last Thursday that he intends to increase excise tax on mobile money transfers from 10 per cent to 12 per cent.

Mr Rotich said funds realised from the levy increase will be used to fund universal healthcare programme that aims to cover all households by 2022.

“We appreciate that the government needs taxes to meet its fiscal objectives but our view is that increased excise duty on mobile money transfers will negatively impact mobile money transfer services and payments and slow down the drive towards a cash lite economy,” said Safaricom, Chief Finance Officer, Sateesh Kamath.

Safaricom maintains that increasing the fee will mostly affect the low-income earners who rely on mobile money accounts not only to transfer but also to keep their cash because they are unbanked.

“Again this could also negatively impact the least able in our society, who are largely unbanked and who rely on mobile transfer services such as M-PESA. It would be unfortunate to reverse the gains we have made in recent past through mobile-led financial inclusion,” said Mr Kamath.

The telecoms operators however remained non-committal as to whether they plan to increase mobile money transfer fees if parliament passes agrees to the proposed tax increment; “We will await Parliament’s decision on the proposed legislation and consider the issue further,” said Airtel spokesperson.

Telkom said it had not properly considered the possible impact of the measure and its response as the budget had preceded a long weekend.

“Taking into account that the Budget was read last week Thursday (into a long weekend), the concerned parties will be looking into this, this week. We are now in the process of reviewing the proposed changes and will be guided by the findings,” said Telkom representative.

Bleak future

If passed, the tax increment is likely to net billions of shillings in additional revenue due to the popularity of mobile money transactions but at the expense of poor Kenyans.

The Consumer Federation of Kenya (Cofek) hit out at the Treasury’s plan to charge higher taxes on basic consumer goods, arguing the measures would hurt the poor at a time they are already struggling with the high cost of living.

“The rise in excise tax, especially on M-Pesa among many others, can only mean a bleak future for the consumer,” Cofek said in a statement.

Some Ksh3.7 trillion ($37 billion) was transacted via mobile phones in the 12 months to March 2018, with Safaricom’s M-Pesa controlling more than three quarters of the transactions.

Millions of Kenyans have come to rely heavily on mobile money keeping value of transactions on a steady growth path in the past 10 years.

For instance, the value of mobile commerce transactions, including those designated as Pay Bill and Buy Goods and Services, passed the Ksh1 trillion ($10 billion) mark for the first time this year.

Data for the second quarter of 2017/18 from the Communications Authority of Kenya (CA), shows transactions grew to Ksh1.17 trillion ($11.6 billion) up from Ksh714 billion ($7 billion) in the previous quarter – an increase of 64 per cent within three months.

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