Development News Edition
Give Feedback
FIFA 2018

Kenya to introduce Robin Hood tax, repeal rate cap

Private sector credit growth slowed sharply after lawmakers capped the amount of interest commercial banks can charge their customers at four percentage points above the central bank rate.


Reuters 14 Jun 2018, 02:43 PM Kenya
  • The government of the East African nation has been criticized in recent years, including by the International Monetary Fund, for ramping up borrowing for infrastructure investments, including a new railway completed last year. (Image Credit: Wikipedia)

Kenya's Finance Minister Henry Rotich on Thursday said he would propose repealing a cap on commercial lending rates, as he presented a budget including a new tax on financial transactions.

Private sector credit growth slowed sharply after lawmakers capped the amount of interest commercial banks can charge their customers at four percentage points above the central bank rate.

"I propose to amend the Banking Amendment Act 2016 by repealing section 33b of the said act," he said, referring to the section of the law that sets the cap on interest rates for commercial lenders.

"This is to enable banks and lenders to provide more credit, especially to the borrowers they consider riskier," he said.

Rotich targeted a budget deficit of 5.7 percent of GDP for the financial year starting next month, less than the 7.2 percent budgeted for 2017/18.

He projected tax revenues to rise by 17.5 percent to 1.9 trillion Kenyan shillings (USD 18.81 billion), equivalent to 20 percent of GDP.

"I propose to introduce a Robin Hood tax of 0.05 percent of any amount of 500,000 shillings or more transferred through banks or other financial institutions," he said in a presentation to parliament.

The government of the East African nation has been criticized in recent years, including by the International Monetary Fund, for ramping up borrowing for infrastructure investments, including a new railway completed last year.

Rotich said he was withdrawing an earlier proposal to introduce a higher tax bracket of 35 percent for individuals earning more than 750,000 Kenyan shillings per month, after members of the public raised concerns.

The current rate is 30 percent for the highest earners.

LEAVE COMMENT