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KILLING THE GOOSE: ROTICH’S MPESA TAX HIKE IS FOOLISH

Since it was launched in 2007 Kenya’s mobile money transfer system, M-Pesa, has led the world in digital financial transactions. Simple and relatively inexpensive to use it has greatly aided ordinary Kenyans in their daily lives, helped to spread wealth and drive the economy forward. Typical then that  in his budget Cabinet Secretary Henry Rotich should take aim at the golden goose and open fire.

Kenyans will now have to pay 12 per cent excise duty on mobile transactions, up from 10 per cent. So, for every Ksh100 sent it will cost you (and benefit the government) Ksh12.

Twelve Shillings may not seem much to some Kenyans, or to outsiders living in richer nations but with a huge number of Kenyans living on Ksh 400 ($4) per day, paying Ksh48 to transfer it to a sick relative, or a family member in need, it’s a lot. And it’s a heavy tax on the small businesses than Kenya needs to thrive, not be hampered by unnecessary increased costs.

Rotich is of course trying to find billions of shillings to fund, for example, Universal Health Care, and do something about the government’s soaring budget deficit, but increasing tax on M-Pesa surely wasn’t the right way to go about it.

KENYA’S 37 MILLION MOBILE ACCOUNTS

There are now some 37 million mobile payment accounts in Kenya through which Kenyans transfer between Ksh 290 billion to Ksh 320 billion every month.

Rotich saw this cash flow as too good a cash cow not to be milked as if it was some sort of extravagant luxury spending that Kenyans were indulging in that was ripe for raiding. It’s not so.

M-Pesa has been one of the most liberating developments in Sub-Saharan Africa and certainly in Kenya. More important than aid money and of more significance to our economy than the Chinese, micro financing, or the Standard Gauge Railway.

Through M-Pesa Kenyans can transact business, transfer money to distant relatives, and by spreading the wealth help push forward the economy, not least in previously disadvantaged areas of the country.

And M-Pesa is not a luxury. Kenyans use it to lend and borrow money, pay personal and household bills, and importantly to run their businesses.

The free flow of capital is essential to the well-being of an economy and Kenya’s economy needs it more than most.

By increasing excise duty on mobile financial transactions CS Henry Rotich is further taxing already taxed income and damaging a system that has worked to the universal benefits of Kenyans. It will be the ordinary Kenyans who will pay the price in more ways than one for Rotich’s folly.

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