Money transfer costs set to go up
Posted Saturday, February 2 2013 at 00:30
- Kenyans to dig deeper into their pockets as new 10pc tax to take effect
- Safaricom reviews charges following 10 per cent rise in tax, rivals to follow suit
Kenyans will pay more for financial transactions including those on mobile money platforms as the government seeks to raise more revenue to fund a growing list of expenses.
An amendment to the Customs & Excise Duty Act published in the Kenya Gazette on Friday says a 10 per cent excise duty passed by Parliament last year would now come into effect.
The tax, which comes in to force in seven working days, affects all cash transfer services provided by mobile phone firms, banks, money transfer agencies and other financial service providers.
Consumers will bear the brunt of the amendment to the Finance Act of 2012 as service providers are expected to pass on the additional costs.
Users of mobile money platforms such as M-Pesa, Orange Money, yuCash and Airtel Money will be the hardest hit given the frequency with which they use the services. At least Sh2 billion is transacted through mobile phones daily. This means that money transfer will be a huge cash cow for the taxman.
Reacting to the new law, Safaricom immediately announced a 10 per cent increase in M-Pesa tariffs for transactions exceeding Sh100. Transactions under Sh100 remain free.
“Our M-Pesa tariff structure is guided by our understanding that we need to sustain the robustness and availability of this service. It also ensures we continuously invest in our platform and extensive distribution network. As Kenya’s largest taxpayer, we appreciate the need to support the government as it seeks to meet its financial obligations. However, we maintain our position that a tax on mobile money is, at that this time, premature and likely to have a negative impact by creating an unnecessary barrier for wananchi who are most in need of basic financial services,” chief executive Bob Collymore said.
yuMobile, which offers its yuCash services for free, said the new development would force it to charge customers.
“We are likely to introduce a fee to cater for this tax burden,” yuMobile country manager Madhur Taneja said in a statement.
Kenya Bankers Association chief executive Habil Olaka said the tax would make it more expensive for customers to transact with their banks.
“It is definitely an additional cost which is likely to be reflected in the pricing of bank products,” Mr Olaka.
Drinkers will also be forced to dig deeper into their pockets for a beer as excise duty has been increased from 40 per cent to 50 per cent.
“Service providers in the banking and mobile telephony industries will pass on the cost to users except in instances where they fear customer flight. Consumers may initially reduce the frequency of transactions but being an election period, this will not be for long,” an investment manager at PineBridge Securities, Mr Edward Gichohi, said.
Rises in the cost of financial services, especially on mobile money transactions, are likely to push up inflation.
When he tabled the Bill in Parliament last year, Finance minister Njeru Githae said the new taxes were meant to raise revenue for the government to cater for increased teachers’ and doctors’ salaries.