Treasury Stops Plan To Increase Call, Internet, Mobile Money Transfer Fees
Ndung'u confessed that raising the excise duty to 20 percent as proposed in the Finance Bill 2024 would do serious damage to the electronic payment ecosystem
Viral Tea Ke Writer 
Treasury Cabinet Secretary (CS) Njuguna Ndung'u on Thursday, June 13 handed Kenyans a huge sigh of relief by proposing to retain the excise duty charged on telephone and internet data services which stands at 15 percent.
While reading the 2024/2025 Budget, Ndung'u confessed that raising the excise duty to 20 percent as proposed in the Finance Bill 2024 would do serious damage to the electronic payment ecosystem as well as access to the internet across the country.
President William Ruto's government has been at the forefront of increasing access to the internet in the form of a digital superhighway, a matter which would have been vulnerable to scrutiny if the proposal was allowed to stand.
A person using a phone. /FILE
"Currently, excise duty is 15% on the following; telephone, internet data services, fees charged on money transfer services by banks, fees charged on money transfers by agencies and other financial service providers.
"In the fees charged on cellular phone service providers...I propose to retain the excise duty rate of 15% on fees charged on money transfer services by cellular phone service providers to benefit the electronic payment ecosystem," he stated.
The Finance Bill 2024 proposed increasing excise duty to 20%, a move that critics and market players said would reverse much of the progress made in digital money transfers and financial inclusion.
Kenyans could also be forced to part with more for making phone calls, paying for mobile data bundles to use the internet and making mobile money transactions.
The National Treasury had initially proposed a hike in excise duty charged on telephone and internet data services from 15 per cent to 20 per cent, a matter which would have forced telcos to increase the cost of both of those services.
The bill also proposed an increase in excise duty for money transfers, meaning Kenyans were staring at the daunting prospect of paying more to send money.
In addition to the excise changes, the National Treasury had proposed in the Finance Bill to introduce VAT on financial services, including forex transactions and cheque processing.
Critics argued that raising excise duty would push more Kenyans away from using mobile money services and resort to carrying cash on hand instead, no matter the amount.
CS Ndung'u meanwhile handed another relief to Kenyans, this time to those earning salaries, as he proposed to get rid of double taxation. According to him, Kenyans were taxed double given that the Housing Levy and the Pay As You Earn (PAYE) are taxed on the same gross salary base.
Therefore, he proposed amendments to make the Housing Levy a deductible tax, which will see PAYE and Housing Levy taxed on different gross income levels.
For instance, under the current model, if a person earns 40,000 in gross pay, the Housing Levy deduction will be based on that gross pay. Equally, the PAYE will be determined based on that Ksh40,000 gross pay.
However, by making the levy a deductible tax, the PAYE can now be determined based on the (Ksh40,000- the Housing Levy). Ultimately, with the new changes, the taxman will be taking less than it does currently.
This however will not spare Kenyans from more salary deductions in the coming days following the anticipated launch of the Social Health Insurance Fund (SHIF), which will see them be charged 2.75 percent of their gross salaries for the new health insurance scheme.
