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 Thursday, February 07, 2013

Kenya's largest mobile operator Safaricom on Friday increased the cost of moving funds through M-Pesa following a new tax on transaction fee earned from mobile money transfer.

Safaricom said customers transferring more than Ksh101 ($1.2) will have to pay 10 per cent more on account of a government decision to introduce a similar tax on earnings from the service.

The telco is opposed to the new tax arguing that it would add more costs to customers and therefore negatively affect the sector.

“As Kenya’s largest taxpayer, we appreciate the need to support government as it seeks to reach its financial obligations. However, we maintain our position that a tax on mobile money is at that this time premature and is likely to have a negative impact on the country’s financial deepening agenda by creating an unnecessary barrier for wananchi who are most in need of basic financial services, “Bob Collymore, the company CEO said.

The government on Friday gazetted amendments to the Finance Act of 2012, introducing a 10 per cent excise duty tax on transaction fees for financial as well money transfer services as it seeks to raise cash to fund its growing recurrent expenditure.

Analysts say the new tax law could have an even bigger impact on banks given the size of their transactions.

“Banks will even be worse because the 10 per cent duty is a huge portion of their revenues. Most players will pass on costs within the next few weeks,” explained Eric Musau an analyst with the Standard Investment Bank.

Source: The East African.