The introduction of higher taxes on financial services and mobile money transfers will hurt Kenya’s efforts to promote financial inclusion, bankers warned on Wednesday.
Kenya Bankers Association (KBA) chief executive Habil Olaka said in an interview that the corresponding higher cost of the services may see consumers deem banking services costly, opting for alternatives.
“Excise tax is not borne by the supplier. The supplier merely collects and remits. Because the cost is borne by the consumer the services are then seen to be more expensive,” said Mr Olaka. “Financial inclusion drives by the country may be hampered by the fact that if consumers are feeling that banking services are expensive they may opt for alternatives,” he said.
Kenya is renowned world over for financial inclusion at 75 per cent by last year. But Mr Olaka said mobile banking could be hit hard as a result of the higher taxes on mobile money transfers as well as financial services.
“It may in the long run not necessarily make banks less competitive but it makes consumption expensive,” he warned.
The cost of bank charges like ATM withdrawal, account fees and over-the-counter withdrawals is set to increase after President Uhuru Kenyatta proposed to raise the tax.
Mobile phone subscribers are also set to pay more for airtime and data services as the government moves to increase excise duty on airtime from the current 10 per cent to 15 per cent.
President Kenyatta’s proposal to double the tax on bank transactions is contained in the memo to MPs explaining his rejection of the Finance Bill by Parliament.
“Exercise duty on other fees charged by financial institutions shall be 20 per cent of their excisable value,” he said in the memo.