Kenya’s financial institutions will now pay 10 per cent excise duty on all money transfers similar to the tax imposed on all mobile money transactions last year.
This follows the lapse of a court injunction by the Kenya Bankers Association and the eventual ruling in Kenya Revenue Authority’s (KRA) favour with the banks failing in their argument that the tax should be levied on goods and not services.
Among the groups that will be affected include savings and credit cooperative societies, postal money services and insurance companies with the tax to affect all transactions dating back to July 20..
The development also follows a clarification on the Finance Bill 2013 that has made it clear that the financial institution term that was earlier used in levying the tax on mobile money transactions will include persons licensed under various laws including the Kenya Post Office Bank, Sacco Societies Act, The Banking Act, Insurance Act and the Central Bank Act.
It is however unclear as to whether banks will carry on the burden or transfer it to the customers as has been seen on the mobile money scenario where Safaricom increased itsM-Pesa charges despite a directive by former finance minister Njeru Githae not to do so.
There have not been anydownturns following the introduction of the tax on mobile money as Safaricom had earlier warned with the number of transactions and volumes continuing to increase.
“We maintain our position that a tax on mobile money is at that this time premature and is likely to have a negative impact on the country’s financial deepening agenda by creating an unnecessary barrier for wananchi (citizens) who are most in need of basic financial services,” said Safaricom CEOBob Collymore following the introduction of the tax in February last year.
