Bankers to MPs: Proposed transaction taxes could drive Kenyans back to mattress banking

The Finance Bill 2024, proposes to impose VAT at a standard rate of 16% on some financial services.

The Kenyan bankers have opposed the new layer of taxes.

"The imposition of 16% VAT on financial services will create a barrier to financial inclusion by making basic services unaffordable," Ag. KBA CEO Raimond Malonje told the Finance Committee.

KBA further warns that if the clause is not amended, the cost of doing business will go up forcing Kenyans to run away from the formal banking for the alternative.

"This goes against international best practice where financial transactions are VAT exempt across the globe," Kenyan bankers submitted.

The 16% VAT will affect the issue of credit and debit cards, telegraphic money transfers, foreign exchange transactions, cheque handling and processing among others.

KBA says the finance bill has classified money under goods and services to be taxed contrary to the VAT Act.

The bankers body now wants the Kuria Kimani-led Finance Committee to amend the clause and retain financial services under exemption from VAT.