The Kenya Bankers Association (KBA) has faulted the new proposed tax measures in the Finance Bill 2024, arguing that it will raise the total tax on financial services, with far reaching unintended consequences on the economy.
- •KBA is calling for a reassessment of tax measures on financial services to prevent its adverse effects on economic growth and competitiveness.
- •Bankers are also calling for consistency in tax policy and for the government to address the cost of compliance.
- •The lobby also wants the government to prioritize consultation and stakeholder engagement.
“By adopting these recommendations, the government can mitigate unintended consequences of imbalanced tax policy and regulation, promoting sustainable economic development and safeguarding the welfare of the Kenyan public,” said Raimond Molenje, the acting Chief Executive Officer of Kenya Bankers Association.
The Finance Bill 2024 proposes VAT on various financial services and raises Excise Duty on money transfer services from 15 per cent to 20 per cent. These services, including money transfers, credit and debit card issuance, cheque handling, and foreign exchange transactions, are essential for individuals and businesses.
According to Molenje, the increased taxation will push the total tax on financial services to 40 per cent, making them unaffordable and undermining financial inclusion progress. The VAT on foreign exchange transactions will elevate costs, affecting fuel prices, and countering efforts to stabilize living expenses.
He says that the higher transaction costs will drive many Kenyans to revert to cash transactions, increasing insecurity and reducing the government’s visibility of cash movements, especially in the informal sector.
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