The government of Kenya’s tax on mobile money transactions is one of the highest in the African continent. First introduced in 2012, government taxes on transaction fees started at 10% and were increased to 12% in 2018. After the controversial Finance bill was signed into law, Kenya mobile money users are now faced with a 15% levy on transaction fees.
A look across the African continent shows that Côte d’Ivoire has imposed a higher levy than Kenya. The West African country requires mobile money operators to remit 18% of transaction fees as tax. This rate puts the country at the top closely followed by Kenya.
Notably, different governments have different tax formats. In 2022, Ghana introduced the Electronic Transfer Levy. This levy requires mobile money operators to remit 1.5% of the value of transfers. Later in the year, the country revised this rate to 1% of transfer values.
Kenya’s neighbour Uganda followed Kenya in introducing a tax of 10% charged on transaction fees. This was introduced in 2013, a year after Kenya introduced mobile money taxes. 5 years later, Uganda introduced another levy. A 0.5% tax is now also charged on the value of withdrawals.
Cameroon, Congo(Brazzaville), Zimbabwe and Tanzania all charge levies on the transaction value. Congo tax is set at 1% of the transaction value. Zimbabwe charges a 2 % tax on value transferred. Cameroon has a relatively low levy of 0.2% of transaction value.
On its part, Tanzania has no fixed rate. In 2022, the country introduced tax bands ranging from TZS 10 to TZS 2,000.
Higher Mobile Money Transaction Fees
In Kenya, mobile money transactions started in 2007 as a means of sending money between friends and relatives. This has since evolved to include payment of bills and services. Data from the Communication Authority of Kenya (CA) shows the country has 38,432,728 active mobile Money subscriptions. This means Kenya has a penetration level of 75.1 per cent.
As has been the case, the increase in tax sees the operators pass the burden to customers. At the end of July this year, Safaricom the dominant player in this sector, increased its transaction fees.
This was announced immediately after the high court lifted the suspension on the Finance Bill 2023. Tax on transaction fees covers all mobile money activities. Since July, Kenyans have been charged more by Safaricom for all chargeable transactions on M-Pesa.
Key mobile money operators in Kenya are telcos. The over 38 million subscribers use M-Pesa (Safaricom), Airtel Money (Airtel), and T-Kash (Telkom). Equitel (Equity Bank) is an exemption as the platform is run by a licensed bank.
Industry observers opine that taxes on transactions and fees do not align with the financial inclusion gains made by the sector.
