You will once again pay more for mobile money transactions if a proposed tax increase recommended by President Uhuru Kenyatta sails through.
The proposed increase on mobile money transfers could see cash transactions such as those on the popular M-Pesa taxed 20% as opposed to the current 12%.
The excise duty also targets money transfer services by banks, other money transfer agencies and other financial service providers.
“Excise duty on fees charged for money transfer services by banks, money transfer agencies, and other financial service providers shall be 20 percent of their excisable value,” said the President.
The increase comes just weeks after the Treasury Cabinet Secretary Henry Rotich slapped a further increase on mobile money transfer services. The effect has seen M-Pesa raise its charges.
The President is also proposing an increase in excise duty charge on airtime and data bundles from 10% to 15%.
“Telephone and internet data services shall be charged excise duty at a rate of 15 percent of their excisable value,” Uhuru’s memorandum to MPs reads in part.
In July, Treasury Cabinet Secretary Henry Rotich increased the levy to 12 percent which triggered telcos to increase charges.
In an address to Parliament on July 1, 2018, he revealed that this particular levy was to be used in funding Universal Healthcare Coverage.
The government has defended this move by claiming that it will spread the burden on taxation over a majority of Kenyans.
The biggest beneficiaries of the memorandum are betting companies and lotteries who will receive a relief after reduction of their tax from 35% to 15%.
However, the winners of games and bets will suffer a 20% tax on their prizes.
The tax increase is part of the government’s attempt at easing the burden of taxation by spreading it across Kenyans. It is however also the government’s attempt at generating revenue in light of the State’s Ksh5.1 trillion owed to creditors vis-a-vis the Jubilee government’s ambitious development strategy Christened “the Big Four Agenda”.
CS Rotich for example, had earlier said that the percentage increase on taxation of money transfer services would go towards the government’s plan of achieving universal healthcare.
Mobile money transfer is highly popular in the Kenyan market, especially in medium and small businesses as well as the informal sector. In the year on year period ending March 2018, Kenyans were found to have transacted around Ksh3.7 trillion via mobile money transfer.
The impact of mobile money transfer services is such that in 2015, Safaricom and parent company Vodafone were ranked number one in Fortune’s inaugural list of companies around the globe that are changing the world. This year, Safaricom/Vodafone ranked 19th.
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