MPs to debate Uhurus proposed tax hike on money transfer services

President Uhuru Kenyatta has proposed hiking taxes on mobile money transfer services, amid a tussle in government over how to boost revenues without hurting Kenyans.

The President proposed increasing the excise duty on mobile money transfer fees from 10 percent to 12 percent, documents reviewed by Reuters showed.

Parliament is set to debate and vote on the measure on Thursday.

Kenya’s biggest mobile phone operator Safaricom said in June it is opposed to a proposed tax rise on mobile phone-based transfers.

Safaricom argues that the new tax will likely mostly hurt Kenyans, most of whom do not have bank accounts and rely on mobile transfer services such as MPesa.

MPesa now has around 25 million users in Kenya out of a total population of 45 million, handling billions of shillings in daily transfer volumes.

The model has been copied in other regional markets and beyond.

Tax hikes on money transfer services are the latest proposal from President Uhuru Kenyatta as he seeks to implement other measures in this year’s budget.

The new measures are designed to fund a range of government development goals including universal healthcare and affordable housing.

Lawmakers and some members of the public have resisted the measures, particularly a new tax on petroleum products.

President Kenyatta however said on Friday the tax is necessary, but that he proposed that it be halved from 16 percent to 8percent.

Last month, lawmakers voted to delay the hike in fuel taxes for two more years, but the national revenue authority started collecting the tax anyway, triggering a strike by fuel transporters and public anger.

They also voted to retain an interest rate cap that the International Monetary Fund has said must be scrapped or modified in return for a new standby arrangement.

The existing standby arrangement expired this month.

Kenyan businesses and the regular mwananchi routinely complain of a heavy tax burden.

Early this month, the Kenya National Chamber of Commerce and Industry (KNCCI) said the government could widen the tax base and increase the rate of tax compliance to 50 percent from the current 17 percent.

It also urged the government to cut expenditure, reduce wastage of public funds and deal with corruption, which some past studies have found account for the loss of up to a third of the government’s annual budget.