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Players in mobile money and possibly FinTech solutions space in Kenya are deeply disappointed following a review by the country’s treasury that will see excise tax on mobile money transfer rise from 10% to 12%.

Safaricom, as the telecom with the leading mobile money transfer solution M-Pesa, has come out expressing its disappointment with the move. The telecom argues that the move will impact the poor most adversely, and will undo most of the gains mobile money and fintech solutions have had on the economy. The telecom further went on to say the move does very little in promoting a cash-lite economy; if anything, it is taking the country steps away from that target.

The review of the excise duty was revealed when the Treasury secretary Henry Rotich read out the 2017/2018 budget. He pointed out that the increased excise duty on mobile money will go towards funding universal healthcare program. The government of Kenya has a plan of extending the program to cover all households in the country by the year 2022.

We appreciate that the government needs taxes to meet its fiscal objectives, but our view is that increased excise duty on mobile money transfers will negatively impact mobile money transfer services and payments and slow down the drive towards a cash-lite economy,” said Sateesh Kamath, the Safaricom, CFO.

The telecom pointed out that the increased excise duty will hurt the low-income earners the most. Especially since they are the ones who are most often unbanked, hence rely on mobile money services such as M-Pesa and other fintech solutions to not just transfer money but also for storage.

Again this could also negatively impact the least able in our society, who are largely unbanked and who rely on mobile transfer services such as M-Pesa,” added Kamath.

It would be unfortunate to reverse the gains we have made in recent past through mobile-led financial inclusion.”

Neither Safaricom, nor other telecoms (Airtel and Telkom) have clearly come out to say whether or not, they plan to pass down the increased excise duty to the end consumers, or if they will shoulder the fee by allowing for a lower profit margin.

The Consumer Federation of Kenya (Cofek) condemned the planned increased taxation on not just the mobile money transfer services, but also common basic goods.

The rise in excise tax, especially on M-Pesa among many others, can only mean a bleak future for the consumer,” said Cofek in a statement.

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