PSV cashless system in Kenya comes a cropper

Politics and policy

Beba Card, one of the cashless fare payments that was introduced to the matatu industry. Tax experts say the failure to implement the system makes it difficult for the government to keep track of the revenues generated by the matatu sector for taxation. FILE PHOTO | DIANA NGILA |   NATION MEDIA GROUP

By JAMES ANYANZWA

In Summary

• The ticketing technology was meant to ensure accountability in the sector.

Electronic ticketing for public service vehicles in Kenya has failed to take off 18 months after its launch.

The cashless fare system was billed as having the potential to generate tax revenues of over Sh182.5 billion ($1.78 billion) per annum.

Tax experts say the failure to implement the system makes it difficult for the government to keep track of the revenues generated by the matatu sector for taxation.

“I am not sure why this policy has not been implemented. It may be that it was difficult to enforce as it is largely a cash business. If this move is successful it will help in widening the tax net, which is a good thing,” said Nikhil Hira, a tax partner at Deloitte & Touche East Africa.

The ticketing technology was meant to ensure accountability in the sector and help Kenya Revenue Authority get PSV owners into the tax net.

According to the Matatu Owners Association (MOA), there are about 80,000 PSVs making over Ksh500 million ($4.88 million)  in gross  revenues per day or over Sh182.5 billion ($1.78 billion) per annum.

National Treasury Cabinet Secretary Henry Rotich  proposed the taxation of incomes earned by PSV operators but the tax authority’s hands are tied by the lack of a regulatory framework governing the sector and lack of a formal system for tracking these incomes.

Currently PSV operators pay advance tax to the government depending on the capacity of the vehicle.

A 41-seater vehicle pays an advance tax of Sh29,520 ($288.39) per annum, a 33-seater Sh23,760 ($232.12), a 26-seater Sh18,720 ($182.88) and a 14-seater Sh10,080 ($98.47).

Cabinet Secretary for Transport and Infrastructure James Macharia said the project had met resistance from stakeholders “who did not want the system.”

The National Transport and Safety Authority (NTSA) blamed the non-implementation on commissions to be charged by banks, interoperability of the system and unwillingness to share the platform.

“We are in discussions with the banks. We have not abandoned the project. It is only that there were some challenges; but we are not giving up on it,” said Francis Meja, NTSA director general.

But PSV operators have formed a company, Pamoja  Ltd,  and partnered with Diamond Trust Bank (DTB) to implement their own system.

KCB, Equity Bank, Co-operative Bank, Family Bank, Jamii Bora Bank and National Bank of Kenya, which initially partnered with the matatu owners to operate the system, may have to hook up to  the  new system under specified terms and conditions.

According to Matatu Owners Association chairman Simon Kimutai, the bone of contention has been the 5 per cent commission the lenders had proposed and the cost of the card readers — Sh10,000 ($97.69) each