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.
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