The Kenyan government’s increased taxation is forcing small businesses to ditch mobile money payments in favor of cash. This comes after the Kenya Revenue Authority (KRA) deployed 1,400 Revenue Service Assistants across the country to enhance tax compliance among traders.
KRA says it has noted a widespread move by some traders to ditch mobile money payments in preference of cash, following the deployment of the Revenue Service Assistants. The tax man is now seeking information from Safaricom on businesses who have opted on the mobile money payment services.
The move by small businesses to ditch mobile money payments is a concern for Safaricom, as Lipa na M-PESA, the company’s mobile money payment platform, contributes about 40% of its service revenue. In the last financial year to March 2023, more than 606,000 businesses received payments through Lipa Na M-PESA, with a total of KES 1.625 trillion ($11.3 billion) transacted in the 12 months.
The trend of small businesses ditching mobile money payments is also a concern for the Kenyan government, as it could lead to a decline in tax revenue. In recent years, mobile money payments have become increasingly popular in Kenya, as they offer a convenient and affordable way for businesses and individuals to make and receive payments.
The government has introduced a number of taxes on mobile money transactions in recent years, in an effort to increase tax revenue. However, these taxes have made mobile money payments more expensive for businesses and individuals, and have contributed to the decline in the use of mobile money payments by small businesses.
The government needs to review its mobile money taxation policies in order to encourage the use of mobile money payments and to increase tax revenue. The government should also work with businesses to develop alternative tax compliance solutions that do not discourage the use of mobile money payments.
