MobileMoney Tax: Hard times ahead for consumers in Kenya ...

CHARLES WOKABI
THE NATION

IN SUMMARY

Consumers are set to bear the brunt of the government?s latest move to tax mobile money transfers and alcohol.
The new tax measures proposed by Finance minister Njeru Githae in an amendment to the Finance Bill 2012 are meant to raise Sh40 billion to pay teachers and doctors and finance the implementation of the Constitution.
Industry sources say the proposals are likely to see the cost of sending money through mobile transfer systems like M-Pesa, yu-cash and airtel money go up.

The cost of sending and withdrawing money through mobile phones is expected to go up by at least 10 per cent, as are the charges of withdrawing money at automated teller machines.

Beer prices will also be affected following an increment in excise duty from 40 to 50 per cent.

The increases are a result of new tax measures announced by Finance minister Njeru Githae on Thursday as he seeks to raise an additional Sh40 billion to pay teachers and doctors, and finance the implementation of the Constitution.

Consumers are set to bear the brunt of the government?s latest initiative to raise more cash to afford its growing list of expenses.

The new measures were passed by MPs through an amendment to the Finance Bill 2012. (READ: Treasury seeks to raise Sh40 billion in new tax measures)

The new 10 per cent excise duty on fees charged by financial institutions will also make it expensive for customers to transact with their banks.

?It is definitely an additional cost and it is likely that it will be reflected in the pricing of individual bank products,? Kenya Bankers Association chief executive officer Habil Olaka told the Sunday Nation on Saturday.

Millions of users

But it is the millions of users of mobile money platforms such as M-Pesa, Orange money, yuCash and Airtel money who will feel the burden of increased taxes on financial transactions.

At least Sh2 billion is transacted daily through mobile phones, making mobile money transfer services an attractive cash cow for the taxman.

?We are still evaluating the impact of this decision but going by last year?s performance, it would translate to giving the government almost Sh2 billion a year,? Safaricom chief executive Bob Collymore said, adding that a decision on whether to pass the additional cost to consumer would be made this week.

However, speaking during a press conference on Friday, Mr Githae said his ministry expects money transfer service providers to meet the new expenses, not pass them on to consumers.

Alcohol consumers are also expected to bear the cost of the increase in excise duty as manufacturers pass on the additional tax by pricing their products higher.

?We are still in the process of computing the magnitude of the impact the review will have on the prices of our products,? Ms Tabitha Karanja, CEO of Keroche Breweries, said when contacted.

The Treasury has also announced plans to raid the lucrative prospecting industry by imposing a 20 per cent tax on proceeds from sale of property or shares in respect of oil companies and mining companies.

There are also plans to heavily tax raw hides and skins, which, according to the government, will encourage value addition.

But the question that remains on the minds of most taxpayers is why a cash-strapped government is increasing taxes on essential services and products while giving MPs a Sh2 billion send-off package.

This is the equivalent of the amount of money the government will be looking to raise from M-Pesa ? the biggest mobile money platform in the country ? through the new levy.

Players have warned that taxing mobile money services risks crippling the sector, which has been praised for deepening financial inclusion in the country.

?Stakeholders need to be cautious in their decision-making to avoid causing stagnation in the sector?s development by making the services unaffordable,? Mr Collymore said.

The new taxes will only compound workers? financial woes.

The government is also looking to raid their payslip to fund healthcare with contributions to the National Hospital Insurance Fund (NHIF) being increased from the current Sh320 to a high of Sh2,000 for those earning above a Sh100,000 per month.

For civil servants, another shocker in the name of an enhanced National Social Security Fund awaits them.

Under the new scheme, NSSF wants all public workers to pay at least 6 per cent of their salaries to a pension fund matched by an equal amount from their employers.

Mr Githae also stood firm in his proposal to backdate the taxation of MPs? perks to June 15 this year when he read the Budget, and is keen on repealing the law that MPs have consistently relied on to shield their allowances from the taxman.

The minister has also amended the law to enable President Kibaki?s salary and perks to be taxed. Kenya?s two-year-old Constitution makes it irregular for any State Officer, to be exempted from paying tax, just because of the office that they hold.

Shielded from taxation

But the minister may still have to battle MPs because, already, the chairman of the Finance Committee, Mr Chris Okemo, has recommended that MPs? perks be shielded from taxation until after the results of the next elections are announced.

If it sails through, Mr Okemo?s proposal will ensure that the lawmakers get six more months of tax-free perks.

The term of the current MPs expires on January 15, 2013. The Parliamentary Service Commission, after negotiating with the Treasury, had already earmarked Sh500 million to cover the taxation of perks until the expiry of their term.

If the minister succeeds, he will add Sh500 million to the public coffers. Mr Martin Ogindo (MP Rangwe) had moved to help the minister make more money by taxing capital gains ? the profit made from selling property, bonds and stocks.

?We?re targeting immovable property, like houses, land, bonds and stocks. The greatest amount of money this country transacts in is property-based ? those who transact on such are the super-rich, they will not feel a thing when you subject their gains to this tax of 10 per cent,? Mr Ogindo claimed.

?We need to widen the tax net. I feel the taxation of capital gains is not going to hurt anybody.? Mr Ogindo?s motion was thrown out.

Mr Githae also has his eye on the data market and seeks to tax ?gains or profits made from the business of transmitting messages?.

Source: http://mobilemoneyafrica.com/mobilemoney-tax-hard-times-ahead-for-consumers-in-kenya/

mariners mets shades of grey pittsburgh penguins record store day jennie garth space needle