KBA urges National Assembly to Reconsider proposed introduction of 16 percent VAT on Financial transactions

NAIROBI, Kenya, May 20... The Kenya Bankers Association (KBA) urges the Government and the National Assembly to reconsider the proposed imposition of 16 percent Value Added Tax on financial transactions outlined in the Finance Bill 2024.

The Finance Bill 2024 introduces VAT on various financial services including issue credit and debit cards, telegraphic money transfers, foreign exchange transactions, cheque handling and more.

"The increased cost of banking to customers will hamper financial inclusion efforts, particularly affecting low income individuals and small businesses couple with Excise duty, the total taxation on financial services would reach 40 percent from the current 15 percent ( exercise duty only),significantly impacting affordability and accessibility".

In addition the proposed VAT on foreign exchange transactions will widen the margin charged on FX transactions it further poses a risk to economic growth by taxing export proceeds and hindering the competitiveness of kenyans products adversely affecting foreign investments in the country, reversing the recovery of the tourism industry with long term economic impact.

KBA further adds that it could threaten stability of foreign exchange reserves and undermine efforts to strengthen the Kenyan shilling saying that the VAT application on FX transactions would result in increased costs including fuel prices, reversing efforts and progress made in stabilizing the cost of living .

"We emphasize the need for balanced approach to taxation that supports public service and economic development without veering off from well grounded banking principle and thus excessively burdening customers".