The Computer Society of Kenya

Since 1986

M-PesapxThe Treasury has been advised to cut duties on cellular services and mobile phones to boost the country’s telecommunication sector.

A new study by the GSM Association (GSMA) says Kenya’s mobile industry and consumers, despite being billed as a front runner in Africa, is one the region’s most heavily taxed inhibiting its potential to grow further and support other economic sectors.

The study conducted by professional services firm EY on behalf of GSMA notes that the Kenyan mobile sector makes a large contribution in taxes and fees relative to its economic footprint.

It says that while mobile market revenue accounts for three percent of Kenya’s GDP, the sector’s tax and fee payments accounts for around 6.5 percent of government total tax revenue.

“The tax contribution of the mobile sector is therefore 2.2 times its size in the economy,” says the study released recently.

“Mobile consumers bear 57 percent of the total sector tax burden. This is mainly due to the accumulation of excise duties on mobile services and mobile money, which together represent almost a third of the total tax payments (at 32 percent).”

This significantly exceeds the Sub Saharan Africa (SSA) average of 20 percent, says the study.

“While mobile operators in other African countries (including Burundi, Ethiopia, Ghana, Madagascar, Niger, Rwanda, Tanzania, and Uganda) can deduct the cost of telecommunication and spectrum licence fees, Kenyan operators do not have this tax deduction,” it says.

“Furthermore, the cascade of regulatory fees, including county deployment fees, also increases the tax contribution of mobile operators.”

By improving these aspects of the tax system, GSMA argues Kenya could improve the affordability of mobile services and make the tax system more conducive to investment.

GSMA, a global trade association representing more than 680 GSM mobile phone operators across 210 countries, argues that high taxes have made mobile communications unaffordable for hundreds of millions of people, holding back social and economic development.

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