13 February 2013

Kenya: Treasury to Formulate New Rules On Mobile Money Tax

TREASURY is working on new regulations on taxing mobile money transfer services aimed at leveling the playing field for all operators.

Finance minister Njeru Githae said a 'minimum charge per transaction' will be introduced soon so that those companies offering money services free also get to pay tax like Safaricom.

Airtel and yuMobile have been offering money services within their platform at no charge and argue they are not liable to pay the 10 per cent tax introduced recently.

On the other hand, Githae said, Safaricom has decided to absorb the tax for small transactions of less than Sh100 putting it at an 'uncompetitive' position with the rest.

"The concern is about those offering free services [as] there is always a cost associated with transferring money. So with the minimum charge it is up to the company if it will still want to meet the cost," Githae said yesterday.

"This will ensure one company will nor be at a disadvantage compared to the others," the minister said on the sidelines of a public-private partnerships workshop in Nairobi.

The Finance Act 2012 introduced amendments to the Customs and Excise Duty Act which introduced a 10 per cent tax on transaction fees for all money transfer services provided by cellular phone providers, banks, money transfer agencies and other financial service providers. Treasury is targeting to collect an estimated Sh4.5 billion from the new tax.

Safaricom, which has 16 million subscribers on its M-Pesa platform, was the first to transfer the 10 per cent tax on to its customers. This saw all charges for transactions above Sh100 go up.

The other players have not changed the pricing but insist their free services should not attract any tax. Githae backtracked on earlier directive that the companies should not pass on the cost to consumers.

"We had expected the companies would absorb the cost, but you know, it is a free market and we do not want to interfere," he said.

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