Companies

Safaricom raises tariffs for mobile money users

collymore

Safaricom chief executive, Bob Collymore. The company is set to increase charges on all transactions above Sh100 on its mobile money platform, M-PESA, from Friday next week. Photo/FILE

Users of mobile money platform M-Pesa will from next Friday pay more to send and receive money after Safaricom said it would pass on the burden of a new government tax to its 16 million subscribers.

The telecom firm announced Friday that tariffs for transactions above Sh101 will go up by 10 per cent starting February 8, while transactions valued below Sh100 will remain unchanged.

The review comes after the government introduced a 10 per cent excise duty tax on transaction fees charged on money transfer services by cellular phone providers, banks, money transfer agencies in an effort to grow its revenues.

Bob Collymore, the Safaricom CEO, says the latest increment was necessary in order to protect the service from being negatively impacted by the tax.

“Our M-Pesa tariff structure is guided by our understanding that we need to sustain the robustness and availability of this money transfer services across the country,” said Mr Collymore.

“It also ensures that we continuously invest in our platform and extensive distribution network.”

For instance, M-Pesa users sending between sh501 and Sh5,000 will from Friday be charged Sh33 - up from the current Sh30 – to send the money to fellow user.

M-Pesa users withdrawing between Sh101 and Sh2,500 from their accounts will also pay approximately Sh27.5 up from the current Sh25.

The increased rate will also apply to transactions involving unregistered users.

Safaricom’s half year results saw M-Pesa record a significant growth with an increase in registered customers to 15.2 million; 9.7 million of whom actively use M-Pesa at least once every 30 days.

The growth led to the 32 per cent increase in revenue to Sh10.4 billion, with M-Pesa now making up 18 per cent of total revenues for the leading mobile telephone company.

Finance Minister Robison Githae has been vocal in the past months about the move to tax the service, arguing this would help government meet its revenue targets.

(Read: New tax on money transfer services to net Sh4.5bn)

In October, the minister warned operators like Essar Kenya and Airtel, who had launched free mobile money services to its customers, of the impending changes in taxation.

“Companies that are giving free airtime minutes (calls) can give it for free but they have to pay tax on it,” said Mr Githae, adding that the new tax is excepted to raise Sh4.5 billion for government.

“We are going to put in a minimum for example 10 per cent of the transfer charge or say Sh50 per transaction (mobile money transfer). By saying that you are not going to charge anything, what that means is that the taxman is going to lose.”

(Read: Githae seeks new tax on telcos’ free services)

The government introduced the excise tax through the Finance Act 2012 as it raced to meet additional expenses like the recent salary increases for teachers, lecturers and doctors.

The Kenya Revenue Authority (KRA) collected Sh342 billion in taxes at the end of December, less than half of the targeted total of Sh817.5 billion for the current financial year.

The amount collected in the first six months of the year is equivalent to 41.8 per cent of the full-year target, which points to possible expenditure cuts and more borrowing by the Treasury to plug the gap.

With these budgetary pressures, KRA has over the past months targeted new revenue streams including taxing landlords, churches and investigating high net clients for suspected tax evasion.

It is not clear how other companies in the affected sectors would react to the taxes but it is expected that they will eventually pass the extra burden to consumers, despite Mr Githae warning against this.