The cost of sending money through mobile services such as Safaricom’s M-Pesa will increase further after President Uhuru Kenyatta proposed to raise tax on the services from 12 per cent to 20 per cent.
Mr Kenyatta is targeting products like mobile money that are consumed by a vast majority of Kenyans in an attempt spread the burden of taxation.
“Excise duty on fees charged for money transfer services by banks, money transfer agencies and other financial service providers shall be 20 per cent of their excisable value,” he said.
The review comes just weeks after Treasury secretary Henry Rotich increased the tax by two percentage points to 12 per cent in July 1, prompting operators to increase M-Pesa charges.
On July 1, Safaricom raised the M-Pesa charges with those dealing with higher transactions bearing the heaviest burden.
Withdrawal of amount between Sh501 and Sh2,500 from M-Pesa agent went up by Sh1 to cost Sh28 up from Sh27 while withdrawing Sh2,501 and Sh3,500, which was previously Sh49 went up to Sh50.
The same Sh1 increase also applied to withdrawals between Sh3,501 and Sh5,000, which moved to Sh67. Further, withdrawing between Sh5,001 and Sh7,500 and Sh7, 501 and Sh10,000 would cost Sh2 more up from Sh82 and Sh110 to Sh84 and Sh112 respectively.
Safaricom slapped a Sh3 increase on transactions between Sh10,001 and Sh15,000, which now stand at Sh162. A Sh4 increase applied on withdrawals between Sh15,001 and Sh20,000 up from Sh176 to Sh180.
Safaricom said higher duty on mobile payments would reverse the gains made on cashless payments and mostly hurt the poor, most of whom do not have bank accounts and rely on mobile cash transfer services.
The government has been encouraging cashless payments to improve security and reduce fraud. M-Pesa revenues grew 14.2 per cent to Sh62.9 billion for the financial year ended March 2018.
Mr Rotich had earlier said funds from the tax increase will be used to fund universal healthcare plan that aims to cover all households by 2022.
Some Sh3.7 trillion was transacted via mobile phones in the 12 months to March 2018, with M-Pesa controlling more than three quarters of the transactions. Millions of Kenyans rely heavily on mobile money keeping value of transactions on a steady growth path in the past 10 years.