Kenya’s Top Cell Phone Provider Opposes Tax Hike On Cash Transfers

Kenya’s biggest mobile phone operator, Safaricom, is against a proposed tax rise on mobile phone-based cash transfers.

In a budget speech last week, the country’s Finance Minister, Henry Rotich, proposed increasing the excise duty on mobile transfers to 12 percent from 10 percent as part of broader measures to raise an extra 27.5 billion shillings ($272 million) in state revenues.

But Safaricom’s CFO Sateesh Kamath said the tax hike would only serve to discourage the drive towards modern payments systems.

“Increased excise duty on mobile money transfers will negatively impact mobile led transfer services and payments and slow down the government’s drive towards a cash-light economy,” said Kamath, according to CNBC.

He added that raising the duty on mobile payments would mostly hurt the poor, most of whom do not have bank accounts and rely on mobile transfer services like the company’s M-Pesa, which now has more than 26 million users in the East African nation of 45 million.

Last month, the company launched a new Bonga platform, which is described as a “conversational and transactional social network.” The move will also leverage M-Pesa as a social network.

“It’s focused on pay, play, and purpose … as the three main things our research found people do on our payment and mobile network,” Shikoh Gitau, Alpha’s Head of Products, said in reports.

As a telco, Safaricom boasts 69 percent of Kenya’s mobile subscribers. Its M-Pesa FinTech app — which accounted for $525 million of the company’s $2 billion annual revenues — has 27 million customers across a network of 136,000 agents.

“It would be unfortunate to reverse the gains we have made through mobile-led financial inclusion in the past few years,” Kamath said.

The proposed tax increases also included a new “Robin Hood” tax of 0.05 percent on bank transfers of above 500,000 shillings. Rotich defended the hikes, saying the money would be used to fund free health care.

The tax proposals have to be debated and adopted by parliament before they take effect.