Banking fees set to rise as levy takes effect
Customers queue for service at a Family Bank branch along Kenyatta Avenue, Nairobi. Photo/SALATON NJAU
The cost of banking services is set to go up as financial institutions announced they would factor in the new tax on transaction fees.
In a notice appearing in Thursday's dailies, the industry lobby, Kenya Bankers Association, says its members would start collecting the 10 per cent excise duty on financial services on behalf of the government.
“KBA on behalf of its member banks therefore wishes to notify bank customers and the general public that the excise duty on all such service fees will be payable to the Kenya Revenue Authority,” the statement reads in part.
The tax was introduced through Finance Act, 2012 with slight amendments- for clarity- contained in the Finance Bill 2013.
The service fees to be taxed include fees and commissions charged on money transfer services and other bank fees, charges and commissions, excluding interest.
The move, which is part of the government’s efforts to increase revenue inflow, is expected to pile pressure on consumers as banks pass on the additional cost to customers. Mobile money services will also be affected.
Fees charged for transactions in savings and credit societies will also go up after the government revised the definition of financial institutions affected by the new exercise duty to include Saccos.
The bankers initially opposed the tax which was last year moving to court to block its implementation.
The case is yet to be concluded by the notice by the bank’s lobby that its members will start charging the new tax customers is seen as relent from the fight to block its implementation.
KBA had argued that the process of altering the computer software used by banks to charge and recover excise duty will take long, adding that it is hard for the institutions to pass on the cost to consumers since any price change for banking services has to be approved by the Central Bank.
Safaricom already revised upwards the fees charged for sending or withdrawing money from Mpesa saying the levy is a consumer tax and so has to be passed on to the customers.
