Kenya Taps Mobile-Money Services to Widen Tax Net

The Kenyan government is advancing its efforts to increase tax revenues by turning its attention to mobile-money transactions, a popular financial service in the country. As mobile-money services, led by Safaricom’s M-Pesa, continue to dominate the financial sector, the government sees this growing industry as a key opportunity to expand its tax net.

Mobile-money services have transformed how Kenyans handle financial transactions, allowing users to send, receive, and store money digitally. With over 35 million mobile money users, these services are used for everything from paying bills to managing small businesses. While the ease of digital transactions has significantly boosted financial inclusion, it has also provided a potential avenue for increasing tax collection in an economy where informal businesses often evade taxes.

Kenya's National Treasury is now looking into new tax policies that will directly target mobile-money transactions. Among the proposals are levies on transaction fees, taxes on service providers, and possible taxes on digital wallets. While some of these taxes are already in place, the government aims to standardize and increase rates, ensuring that all stakeholders, including users, service providers, and merchants, contribute to the national revenue base.

Finance experts suggest that the move could generate significant additional revenue, helping the government meet its fiscal targets. However, critics warn that additional taxes could disproportionately affect low-income citizens and small businesses, who rely on mobile-money services for day-to-day operations. 

Safaricom and other mobile-money providers are expected to lobby against heavy taxation, citing the risks of stifling innovation and financial inclusion. Nonetheless, the government argues that the increased taxation will be a fair trade-off for a more sustainable and equitable economic framework. 

As discussions around these new tax policies unfold, the impact on Kenya’s economy and the mobile-money sector will be closely watched. 

This draft focuses on Kenya's mobile-money sector and the government's efforts to tap into it for expanding tax revenue.