Bankers warn of revenue loss over proposed Finance Bill 2024

The Kenya Bankers Association (KBA) now says the government could lose up to 10 percent of its tax revenue that comes from the sector, which is an equivalent of 180 billion shillings of its revenue if the Finance Bill 2024 sails through.

According to KBA, the proposals in the Bill will undo gains made in the financial sector over the last 15 years.

Speaking to Citizen TV, KBA acting CEO Raimond Molenje urged the government to increase the tax bracket to achieve its revenue goals as opposed to overtaxing the formal sector.

The Bill is also seeking to increase the excise duty on fees charged for money transfers via telcos and banks from the current 15 percent to 20 percent.

If the proposal is approved to become law, it will lead to an increase in the cost of basic banking services, raise the cost of credit, as well as drive transactions to the black market, an issue that the KBA says will set the country's financial sector back 15 years.

"There will be a reduction in the volume of transaction and most of the transaction will happen in the 'black market', well go back to cash transaction just to avoid some of this cost... If you go back to a cash economy that facilitates illegal activities, there is no question about that," said MarsheL Nyangor, an Economic Analyst at Zimele.

It is the impact of these illegal activities that the KBA is concerned about coming at a time when Kenya has been placed on the Financial Action Task Force's grey list over its weak measures against money laundering and terrorism financing, noting that this will make Kenya unattractive to investors.

"We are actually complicating the journey to get ourselves out of the grey list. That grey list just makes doing business in Kenya because with all this monitoring there are compliance requirements that are embedded in it," added Raimond Molenje, Ag. CEO KBA.

The bankers are also warn that the Bill could erode the gains made by the Kenyan currency over the last months, by imposing VAT on foreign exchange which they say will lead to an increased cost of foreign currency.

Further, exporters of coffee, tea, avocado, and other products will see a significant reduction in their earnings owing to the VAT on foreign exchange transactions.