Kenyan Banks oppose State plan to hike tax on financial services
Kenya’s plan to charge value added tax on financial transactions will raise total taxation on financial services to 40% from 15% currently, impacting affordability and access, according to an industry lobby.
Levying the tax on foreign-exchange transactions in particular will widen margins charged, posing risks to economic growth by taxing export proceeds and hindering the competitiveness of Kenyan products, Kenya Bankers Association Chief Executive Officer Raimond Molenje said.
In addition, it will hurt foreign investment, reverse recovery of tourism and further threaten the stability of foreign-currency reserves, he said in an emailed statement.
“The increased cost of banking to customers will hamper financial inclusion efforts, particularly affecting low-income individuals and small businesses,” Molenje said.
The East African nation intends to do away with exemptions on value added tax for financial transactions of 16%. The proposed legislation also raises excise duty on mobile-money transactions to 20% from 15% currently.
“It will make basic banking expensive, raise cost of credit, and drive people to the black market,” NCBA Group’s Chief Executive Officer John Gachora said on X. “Large FX transactions will be offshored. Completely unnecessary!”
