Safaricom has disapproved Treasury’s budget proposal to increase excise duty on mobile transfers from 10 per cent to 12 per cent as part of Govt’s strategy to raise an additional Sh27.5 billion for the 2018/19 budget.

According to Safaricom’s chief financial officer & acting CEO Sateesh Kamath, the proposed increase in excise duty will negatively affect mobile transfer and payments services thereby slowing down the government’s plans for transforming Kenya into a cashless economy.

Budget Proposal is Retrogressive According to Treasury’s proposal, KRA will keep Sh12 for every Sh100 transferred via mobile money platforms. The proposal targets the 30 million people that rely on mobile transfers, a sector whose value stood at Sh1.76 trillion in 2017.

“It would be unfortunate to reverse the gains we have made through mobile-led financial inclusion in the past few years,” said Kamath adding that the proposal will mostly affect the poor, who are unbanked, and rely on mobile money such as Safaricom’s M-Pesa to make transactions.

The budget proposal is targeting individual to individual transfers which hit Sh596.4 million in 2017 and could also apply to commercial transfers valued at Sh1.1 trillion in 2017.

Francis Kamau, partner and tax leader at Ernst and Young observes that although the increase in excise duty will affect the poor, the middle class and other higher income groups will continue to use mobile money transfers.

“If you look at it, the government appetite is astronomical. It could actually be looking beyond money transfer. Once they introduce it is going to affect even calls,” he said.

Another proposal introducing 0.05 per cent tax on money transfers of over Sh500,000 through financial institutions could see the cost of transferring money going up. The tax, known as the ‘Robin Hood’ tax borrows from the wealthy to assist the poor.