Treasury plans to raise excise duty to 12 per cent from current 10 per cent

Sateesh Kamath Chief Financial Officer Safaricom speaks when Safaricom Announced Un - Audited results for the half year ended 30th September 2017. PHOTO:WILBERFORCE OKWIRI

Safaricom has spoken for the first time since the Treasury increased taxes on mobile money transfer, saying the move will hurt the financial service.

The firm, which has the biggest market share of the mobile money sector, says it recognises the Government’s need to collect additional taxes, but the hike will have a negative impact on the sector.

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

“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 through mobile-led financial inclusion in the past few years,” he added.

During his budget speech last week, Treasury Cabinet Secretary Henry Rotich raised excise tax from 10 per cent to 12 per cent as part of the measures targeting to raise over Sh4 billion to fund Universal Healthcare.

This means that for every Sh100 charged for the transactions, Sh12 will now go to taxes.

The fact that mobile money customers pay when they send and also when they withdraw cash means they end up paying taxes twice on the same amount of money. Bank transfers were also not spared. Rotich introduced a Robin Hood tax of 0.05 per cent on any amounts of Sh500,000 or more transferred through banks and other financial institutions.

The grounds for taxing large bank transactions was set in 2016, when the Central Bank of Kenya introduced tough measures discouraging Kenyans from withdrawing more than Sh1 million and instead encouraged them to send such amounts from one account to another via Real Time Gross Settlement. 

But it is the mobile money taxes that will be a cash cow, given that the services are widely used across all income groups, where people are allowed to transfer as little as Sh100.

PAYMENT ACCOUNTS

Kenya currently has more than 37 million mobile payments accounts that make about 130 million transactions every month.

Last year, Kenyans were sending between Sh290 billion and Sh320 billion using their mobile phones every month, an amount that can fund the entire construction of the Standard Gauge Railway from Mombasa to Nairobi and buy most of the locomotives the country has acquired.