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Kenya passes new taxes on resource, telecoms firms to lift revenue

* Govt faces 40 bln shilling funding shortfall

* Analyst says new tax measures punish success

By Duncan Miriri

NAIROBI, Oct 5 (Reuters) - Kenya has approved new taxes targeting oil and mining firms and mobile phone-based money transfer services to help plug a growing funding gap, though the move could potentially scare off foreign investors.

A 20 percent levy will now be charged on sales of property or shares in oil, mining and mineral prospecting firms. A 10 percent excise duty was set on fees charged for money transfer services by mobile phone service providers, banks, money transfer agencies and other financial service providers.

Finance Minister Robinson Githae said the government had opted to implement the new taxes because it could not afford to borrow more locally, as that could crowd out the private sector.

"It is imperative that as we fund the additional expenditures, the government continues to live within its means while safeguarding macroeconomic stability," Githae said.

Githae said the government expected to make 4.5 billion shillings immediately from the money transfer tax.

"This is the fastest-growing industry so the taxman should also get his share," he said, adding that operators will bear the costs, not users of the services.

Analysts say the proposed measures risk discouraging investment into the country's nascent natural resources sector.

Aly Khan Satchu, an independent trader and analyst, said the measures were ill-timed because the country's largely foreign-owned oil and mining industries were in their infancy, adding they would scare away potential investors.

"These measures are the equivalent of a red card," he said.

The government's funding shortfall has jumped to 40 billion shillings after a pay rise was agreed last week for teachers that added an extra 20 billion shillings to the Treasury's bill for the fiscal year to next June.

The pay deal adds to the costs of implementing a new Constitution and expenditures related to Kenya's military incursion into Somalia.

Bob Collymore, chief executive of Kenya's leading mobile phone firm Safaricom , which pioneered the mobile phone-based money transfer services in 2007, told Reuters he was still studying the new tax measure.

The firm's money transfer business, M-Pesa, grew by 43 percent to 16.9 billion shillings in revenue in the business year to the end of March.

In the first three months of 2012, subscriptions to mobile phone-based money transfer services stood at just under 19 million out of a total 29 million subscribers during the period, the regulator Communications Commission of Kenya said.

Githae said the new tax on money transfer services, credited for extending financial services to a greater part of the population, was not aimed at punishing success.

But Satchu said that was exactly what it would do.

"The economy needs to grow, and no economy grows where success is penalised," he said.

"If the government is now caught short on the revenue front, the finance minister should spend his time right sizing government and its recurrent expenditure and not seeking to punish our successes," he added.

Investors have also started to pay attention to Kenya's natural resources potential, driven by a global surge of commodities prices, which has sent firms into new frontiers.

The government is preparing a mining bill and seeking funds for a nationwide aerial survey to further boost investment in the sector. ($1 = 84.9500 Kenyan shillings)

(Editing by George Obulutsa and Hugh Lawson)

((nairobi.newsroom@reuters.com)(Tel: +254 20 2224717))

Keywords: KENYA TAXES/