Treasury slaps higher tax on money transfer

Some Sh3.7 trillion was transacted via mobile in the 12 months to March 2018.

A Safaricom agent transacts on the M-Pesa money transfer service. FILE PHOTO | NMG 

IN SUMMARY

  • The government is likely to net billions in additional revenue from the mobile tax due to the huge popularity of mobile money transactions but at the expense of poor Kenyans.
  • Some Sh3.7 trillion was transacted via mobile in the 12 months to March 2018.
  • The government at the same time slapped a 0.05 per cent tax on Sh500,000 and above transferred through banks and other financial institutions

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Treasury CS Henry Rotich has hit ordinary Kenyans with higher excise taxes on mobile money transactions and kerosene as he looks to finance a Sh3 trillion budget amid wanting revenue performance.

The surprise increase in the mobile levy will see Kenyans pay an excise duty of 12 per cent on money transfer services, up from the current 10 per cent.

The government is likely to net billions in additional revenue from the mobile tax due to the huge popularity of mobile money transactions but at the expense of poor Kenyans.

Some Sh3.7 trillion was transacted via mobile in the 12 months to March 2018.

Bank transfers

The government at the same time slapped a 0.05 per cent tax on Sh500,000 and above transferred through banks and other financial institutions, with Mr Rotich saying the proceeds of these taxes will go towards financing the universal healthcare plan.

“In order for the government to get a fair share of revenue from these financial activities and to finance critical programmes, I propose to introduce a ‘Robin Hood Tax’ of 0.05 per cent on any amounts of Sh500,000 or more transferred through banks and other financial institutions,” he said.

“In addition, I have increased excise duty fees charged on money transfer services by cellular phone service providers from 10 per cent to 12 per cent. The revenue realised from these measures shall be used to fund universal health care.”

The excise duty on kerosene has been raised from Sh7.21 per litre to Sh10.31 to match that of diesel, with low income households that use the fuel for lighting and cooking the most affected.

Curb fuel adulteration

Mr Rotich said the move is meant to curb the adulteration of motor vehicle fuel using kerosene by unscrupulous dealers.

Petroleum products will in September also start attracting VAT of 16 per cent, promising additional pain for the low income houses in three months.

Higher cost of transport filters through to other segments of the household budget such as food.

The Consumer Federation of Kenya (Cofek) immediately hit out at the higher excise duties on the basic items, saying they are targeting the poor at a time when they are already struggling to afford the cost of daily sustenance.

“The cost of living will go up considering the cost of kerosene and transport will rise. The rise in excise tax especially on M-Pesa among many others can only mean a bleak future for the consumer,” said Cofek in a statement.

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