NCBA Bank CEO John Gachora has raised alarm bells over the potential consequences of the Kenyan government’s proposed transaction charges, warning that they could lead to a foreign exchange crisis.
In a series of posts, Gachora criticized the charges outlined in the Financial Bill 2024, describing them as “unnecessary taxation” and likening them to the introduction of both Tobin Tax and Robinhood Tax.
The proposed transaction charges, according to Gachora, threaten to cripple the vibrant banking industry in Kenya and alienate major transactions.
He argued that the scrapping of VAT exemptions for banking transactions would have severe repercussions, potentially driving many individuals and businesses away from formal banking channels.
Gachora’s concerns center around the potential impact of these charges on the cost of banking services and access to credit.
He warned that the proposed taxes could make basic banking prohibitively expensive, leading to a surge in “mattress banking” and pushing people towards informal, unregulated financial channels.
“The government’s scheme to introduce these transaction charges poses a significant threat to the banking industry,” Gachora stated.
“It will not only make basic banking expensive but also raise the cost of credit, driving people towards the black market.”
Gachora’s criticism highlights the delicate balance between taxation and economic stability.
While the government aims to raise revenue through these measures, there are concerns about the unintended consequences they may trigger.
By making banking services more costly, the proposed charges could deter investment and hinder economic growth.
Gachora emphasized the potential for these charges to exacerbate Kenya’s foreign exchange challenges.
With the country heavily reliant on imports, any disruption to the banking sector could have far-reaching implications for currency stability and trade.
“The introduction of these charges risks plunging Kenya into a foreign exchange crisis,” Gachora cautioned.
“We cannot afford to alienate major transactions and undermine investor confidence in our financial system.”
John Gachora’s vocal opposition to the proposed transaction charges underscores the need for careful consideration of their potential impact.
While taxation is essential for government revenue, it must be balanced against the broader economic consequences.
As Kenya navigates its fiscal policy, it must strive to maintain a healthy banking industry and ensure access to financial services for all citizens.
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