Phone manufacturers complain over VAT Bill

August 18, 2013
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, SAMSUNG-SHOPNAIROBI, Kenya, Aug 18 – Mobile phone manufacturers are petitioning the President not to assent to the Value Added Tax Bill as currently constituted because it will increase the cost of mobile phones by 16 percent.

Samsung, Intel, Nokia, Huawei, Microsoft and iHub want the President not to sign the Bill into law arguing that it will drag down Kenya’s economic momentum by dealing a blow to the digital economy, driven by young Kenyans.

They argued that the 2009 VAT exemption on mobile devices increased subscriber penetration and drove down the cost of ownership so that more Kenyans could benefit from mobile technology.

“Since the exemption, Kenya has experienced a 25 percent increase in mobile penetration and the correlation between growing mobile subscribers and economic growth is well established by the World Bank, McKinsey, GSMA and others,” argued the manufacturers.

“As a general rule, increasing mobile penetration by 10pc yields an estimated 1.2pc growth in GDP across the economy.”

The organisations also told the government not to focus on generating revenue from taxing productivity inputs responsible for Kenya’s innovations on the mobile platform.

They insisted that the best source of government revenue would come from a highly skilled and productive workforce and asked the government to find alternative sources of revenue.

The group also observed that the proposed amendment to the Tax Bill would have a negative impact on Kenya’s emergence as a hub for world class innovation.

“Kenyan developers are broadly recognised among some of the most innovative thinkers, tackling some of Africa’s biggest challenges through technology. We should empower and support these young people, not undermine their creativity with a tax,” they insisted.

Mobile penetration now stands at 75pc in Kenya and in December 2012, some 16.2 million Internet users were recorded.

The VAT Bill was passed before MPs went for recess and the President has until August 19 to assent to the Bill or decline to assent to it.

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