A global association for mobile operators has asked President Kibaki not to assent to the law that will see mobile money transfer transactions attract excise duty of 10 per cent of the transaction fees.
The GSM Association (GSMA) reckons that the new tax will hurt the earnings of the operators, raise transaction fees and reduce investments in Kenya’s mobile money transfer market, whose value of transactions has increased five fold in the past three years.
The tax, contained in the Finance Bill unveiled by Finance Minister Njeru Githae on October 4, together with other revenue measures will help seal a financing shortfall created by the recent raise in salaries for civil servants and increased expenditure on implementation of the Constitution.
The President returned the Bill to Parliament for amendments after blocking the Sh2.1 billion end-of-term bonuses Members of Parliament awarded themselves in the legislation.
“The President must assent to it for the tax to become law. Our hope is that he will deny his assent,” said Simone di Castri, the regulatory director at GSMA in a statement.
“Adding this new 10 per cent tax on mobile money transactions will stifle a nascent and important driver of commerce and socio-economic development. Unfortunately there was no consultation or engagement with stakeholders before the amendment was introduced,” he added.
The GSMA represents the interests of about 800 mobile operators in more than 220 countries.
Kenya has almost 20 million mobile money transfer users from the four mobile operators — Safaricom’s M-pesa, Airtel money, yuCash and Orange Money — up from 6.5 million users in 2009.
The Central Bank of Kenya estimates that value of mobile money transactions stood at Sh375 billion in the first quarter of 2012 up from Sh240 billion in a similar period last year.
The Kenya Revenue Authority (KRA) expects to generate Sh2 billion from the new tax, with Safaricom expected to pay an average of Sh1.6 billion based on the Sh16.4 billion it generated from M-Pesa in the year to March.
Safaricom dominates the mobile money transfer market with its nearly 40,000 M-Pesa agents. Its rivals share the remaining 9,000 agents. Airtel says it has 6, 000 agents.
Over the past months, KRA has increased its resolve to mop up taxes it believes go uncollected either intentionally by tax evaders or by omission where the authority has not set up necessary mechanisms.
One of the new measures is Electronic Tax Registers that will enable interconnectivity to a real-time central GPRS server to facilitate two-way communications between taxpayers and the taxman.
The tax collector is also targeting landlords and churches.
But Mickael Ghossein, the CEO of Telkom Kenya, reckons that mobile phone operators will pass on the additional tax expenses to consumers.