Mshwari Loans

Excise taxes on airtime, data and loans have gone up from 15 to 20 percent following the effect of the 20 percent excise duty from July 2021.

The Revision of excise duty is the latest move from the government to collect more revenue (at least Sh8 billion) from Banks and Telco companies.

Mobile telephone users will pay the 20 percent excise duty in addition to the 16 percent VAT for services. To put it into perspective the government will collect about Sh 36 in tax out of every 100-bob worth of airtime.

Airtel Kenya, in an SMS, sent to customers on 2^nd July, was among the first mobile companies to communicate to its customers a Sh 2.78 increase in call rate, while pointing out that the cost of SMS and Data will remain the same.

“Dear Customer, due to an increase in excise duty from 15% to 20% from 2^nd July, your call rate is now KSH 2.78 per minute. SMS and data rates remain the same” Airtel Kenya.

Mobile Loans

The 20 percent excise duty will also have an effect on loans. Banks have already issued alerts to their customers to communicate the increased tax effective from 1^st July.

The cost of mobile loans is projected to be higher compared to normal loans because charges for digital products are largely dominated by fees. Mobile loans are popular in the country due to their convenience and also appeal to millennials who have a preference for Digital Banking.

M-Shwari for instance will now have its facilitation fee increase to 9 percent up from whose 7.5 percent.

“Dear Customer, following the enactment of the Kenya Finance Acto 2021 by the government of Kenya, we wish to inform you that beginning July 1^st, 2021 the fess on your M-shwari loan will be subject to excise duty at 20%,” Mshwari announced.

Financial Inclusion

The increased taxes on mobile loans are a blow to a large population of Kenya’s unbanked.

According to a 2019 report by Financial Inclusion Insights, half of Mshwari customers do not have any other bank account, an important development for financial inclusion in Kenya

Mshwari is a product of the Commercial Bank of Africa (CBA) in partnership with Safaricom.

Adding more Tax on such basic things as airtime and mobile short-term loans is ill-timed and adds a further burden to the already overtaxed taxpayers. The Kenya Revenue Authority (KRA) should have put more effort in going for tax defaulters to raise the KSH8B it seeks to raise from this excise duty other than going for low-hanging fruit such as excise and VAT.