Kenya: Safaricom wants to negotiate a tax arrangement as part of its proposed split with M-Pesa
January 10th 2023
The telecom operator has indicated that it wants to discuss with the current government with a view to obtaining tax exemptions to carry out the separation of its telecommunications activities from those of financial services.
In Kenya, the telecommunications operator Safaricom wants to benefit from tax exemptions, including the capital gains tax, which will increase from 5% to 15% in 2023, in order to carry out its project of separation from its M-Pesa mobile banking.
The local media Business Daily Africa , in an article published this Monday, January 9, exposed Safaricom’s fears of being imposed the payment of taxes in the event of a split with M-Pesa, by the Kenya Revenue Authority (KRA), the authority responsible for collecting tax revenue on behalf of the government.
Peter Ndegwa, chief executive of the East African telecoms giant, had made it clear that he would seek tax waivers from the government as part of the initiative. Except that the current president, William Ruto, has promised to be rigorous in the collection of tax revenues and has asked those responsible for this activity to ensure that everyone pays. Moreover, the tax authority expects to collect nearly 500 billion Kenyan shillings ($4 billion) by June 2023, and to increase this amount over the next few years.
This situation would therefore be likely to slow down, if not hinder Safaricom’s plan to separate from M-Pesa. Recall that the opposition in the Kenyan parliament had tabled a bill in 2017 calling for the split of Safaricom and its mobile money activity. This separation had been motivated by suspicions of abuse of position by Safaricom on the Kenyan market, and also the granting of banking services via M-Pesa, without first having licenses.
While Safaricom’s request for tax exemptions is filed, the company’s board has yet to approve the spin-off of Safaricom’s telecommunications business from its banking business. However, the management of the institution says it is working in this direction.
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