Digital lenders oppose ‘discriminatory’ levy
Digital lenders have rejected a proposal in the Finance Bill 2023 requiring them to remit a 20 per cent excise duty on interest charged on loans while other financial institutions are only required to pay the tax on other fees.
In submissions to the Finance Committee of the National Assembly public participation on the Finance Bill 2023, Digital Financial Services Associations of Kenya (DFSAK) described the move as discriminatory and punitive in the current economic situation.
“This means that while Digital Lenders are paying Excise Duty on interest on digital loans, other financial institutions, including banks, are not,” DFSAK chairman Kevin Mutiso said in his submission to the legislators.
Excise duty on interest charged by digital lenders, the association said, contradicts the approach taken on core incomes of financial institutions, such as interest for banks, premiums for insurers, and premium-based commissions for insurance brokers, where such income is exempted from excise duty. “This leads to a lopsided market favouring other financial institutions over digital lenders when both sets of institutions provide the same service to the citizens of Kenya,” Mutiso said, adding that the extra expense makes it difficult to compete effectively.