Safaricom Weighs in on Proposed Mobile Payments Tax Hike

Governments look for the opportunities they can find to levy taxes. It’s just part of their nature to try and bring in more cash where they can. For the Kenyan government, the growing popularity of mobile payments, especially mobile-based cash transfers, is looking like an increasingly ripe plum to pluck. However, it’s not a plan that’s coming without opposition, as Safaricom—Kenya’s biggest mobile operator—is weighing in against the proposal.

The Kenyan government, as expressed through Finance Minister Henry Rotich, proposed an increase in the excise duty on mobile cash transfers from its current 10 percent to 12 percent, a move that would add around $272 million to government revenues. Also included would be a “Robin Hood” tax of 0.05 percent on transfers above 500,000 shillings—about $4,945 as of this writing—which would be used to help fund health care in Kenya.

That’s no small amount, especially for Kenya, whose gross domestic product (GDP) was $70.5 billion in 2016. Not surprisingly, though, Safaricom isn’t in favor of such a move. Its CFO, Sateesh Kamath, noted “Increased excise duty on mobile money transfers will negatively impact mobile led transfer services and payments and slow down the government’s drive towards a cash-light economy.”

Kamath also noted that increasing such taxes would be a direct blow to the poorest citizens, who increasingly turn to mobile payments options to pay bills and the like. Said poor commonly don’t have bank accounts, so mobile becomes the next best thing.

This is a reasonable enough stance to take; the Kenyan government has been encouraging mobile payments for some time now, likely eager to take advantage of the cost savings involved in printing less money. Now, to turn around and try to tax it further smacks of opportunism. Safaricom, meanwhile, would likely prefer there were no taxes at all, which would encourage users to route cash through its systems and let it get a handling surcharge accordingly for offering the convenience of mobile.

The tax hasn’t gone through yet, so it’ll be worth watching to see if it does and what effect it has on mobile adoption. It’s not likely to be a positive effect, though.