Telcos, banks and farmers targetted as in new tax plans

It has proposed a 20 per cent excise duty on mobile and bank transactions in the Finance Bill, 2024.

An employee assists a customer to set-up M-Pesa money transfer service on his handset inside a mobile phone care centre in Nairobi, May 11, 2016.
Image: Reuters

The Finance Bill of 2024, if enacted in its current form, is poised to impact mobile and bank transactions in Kenya, potentially leading to a minimum five percent increase.

The proposed amendments, aimed at financing the budget for the upcoming financial year commencing July 1, are set to overhaul tax reliefs introduced in 2022.

The bill proposes a return of excise duty rates on bank transactions to 20 percent from the previous 15 percent, while excise duty rates on mobile phone transactions, such as M-Pesa, are slated to rise from 12 percent to 20 percent.

Consequently, telecommunication companies may increase transfer and withdrawal charges to offset the additional tax burden.

Presently, transferring amounts ranging from Sh101 to Sh500 on M-Pesa incurs a fee of Sh7, with withdrawal charges amounting to Sh29.

A five percent hike would see these charges rise to approximately Sh7.35 and Sh30.45, respectively.

Similarly, transfers of larger amounts, such as Sh250,000, would incur higher charges, with transfers and withdrawals costing Sh113.40 and Sh324.50, respectively.

Furthermore, the proposed bill indicates a potential increase in excise duty on bank transactions from the current 15 percent to 20 percent, which may lead to elevated bank charges.

Despite the government's intention to boost revenue collection, particularly aiming for a target of over 20 percent of GDP in the next fiscal year, the potential rise in mobile transaction charges could hinder Kenya's progress as a digital hub.

Additionally, the bill suggests imposing a five percent withholding tax on agricultural produce delivered to organized groups, such as co-operatives.

This measure aims to broaden the tax base and ensure farmers are included in tax compliance.

Moreover, the bill outlines various strategies to enhance revenue collection, including the phasing out of preferential corporate tax rates and the rationalization of tax exemptions for corporate entities and individuals.

The proposed bill also encompasses amendments to the Income Tax Act, including the expansion of the definition of digital content monetization and the review of digital service tax (DST) to incorporate residents.

Furthermore, it introduces income tax on repatriated income and digital asset tax payable by individuals deriving income from the transfer or exchange of digital assets.

Furthermore, the bill proposes changes to excise duty payment requirements for manufacturers of alcoholic drinks and beverages, allowing them to remit excise duty within five days instead of 24 hours from the time of product removal from the stockroom.

Additionally, the government is considering the introduction of a carbon tax framework aimed at reducing greenhouse gas emissions and enhancing environmental sustainability.

Moreover, the bill seeks to amend the Data Protection Act of 2019 to exempt the processing of personal data for taxation purposes, aiming to facilitate access to data.

Additionally, it proposes a reduction in the VAT rate by 1 percent and an adjustment of the VAT registration threshold from Sh5 million to Sh8 million, aiming to ease the tax burden on businesses.