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Kenya introduces 'robin hood' tax on mobile money transfers

Kenya , 15 Jun 2018

Kenya introduces 'robin hood' tax on mobile money transfers

Kenyans will pay more for mobile money transfer if new tax measures proposed by the government are implemented, according to this year's budget estimate statement.

Officials want to increase excise tax on money transfer from 10% (introduced in 2013) to 12%, meaning the consumer will have to pay more in transaction fees.

In his presentation of the annual budget for 2018/2019, Henry Rotich, Cabinet Secretary for National Treasury, said funds generated through the tax would be used to support local healthcare.

Kenya has approximately 30 million mobile money subscribers and according to statistics from the Communication Authority (CA), during the three-month period to end December 2017, 607.4 million mobile money transfer transactions valued at Kshs 1.763 trillion (US$17 billion) was recorded.

Mobile money service providers, including banks and alternative financial institutions, will have to adjust their rates to reflect the new tax.

Rotich added, "In order for the government to get a fair share of revenue from these financial activities (money transfer) and to finance critical government programs, I propose to introduce a 'robin hood' tax of 0.05 percent of any amount of Kshs 500,000 (US$5,000) or more transferred through banks and other financial institutions."

Kenyans did not welcome this new move, with some noting it will reverse the gains made by the mobile money services.

@Tumwesigye_Jose The mobile money tax will indeed kill businesses. I do not see how it will help short or long term #NTVBudgetDialogue18

@JAKADAWA So by raising tax on Mobile money and bank transfer, how is the government benefitting? Will people go back to pillow case banking?

According to the GSMA's Rethinking Mobile Money Taxation report published in October 2017, adding tax to mobile transactions makes it expensive for low income earners and slows down financial inclusion that mobile money has championed.

"Rather than levying taxes on the fledgling mobile money industry, governments should consider enabling the growth of mobile money services by digitising the payment of fees, rates, taxes and levies due from taxpayers," reads an excerpt from the report.

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