Mobile firms want VAT scrapped

May 22, 2009

, NAIROBI, Kenya May 22 – Players in the mobile phone industry are expressing optimism that Treasury may incorporate proposals to abolish value added tax (VAT) on handsets.

Nokia General Manager for East and Sub-Saharan Africa Gerard Brandjes says players have presented their proposals and lobbied Treasury to consider the proposal which would have a positive impact on the country’s GDP.

“Sixteen months ago, Ghana made a very bold decision and they removed the VAT element associated with mobile phones as well as the customs duty,” Mr Brandjes said.

Mr Brandjes noted that Ghana made the move after realising that it would be of economic value to the country.

He appreciated that the government had zero rated computers and accessories in a bid to spur growth in the communication industry and therefore should not have a problem with the proposal to zero-rate handsets.

“You must have realised that phones are becoming the next computers for most consumers in the emerging market and therefore such a move will go a long way in helping the government in this objective,” Mr Brandjes explained.

However in previous sessions Information Permanent Secretary Bitange Ndemo has pointed out that though computers are zero rated they still attract VAT.

Service provider Safaricom also seized an opportunity on Thursday to lobby Finance Minister Uhuru Kenyatta to consider a reduction in excise tax on airtime, a proposal that players in the communication industry have made time and again without success.

However in response Mr kenyatta only fell short of shooting down the proposal noting that the funds were an important contribution to the country’s budget.

“As a major shareholder in this company, other than the dividend cheque you give us we are very grateful for the monthly cheque as you must accept that Sh26 billion goes a long way  in making my arithmetic make sense,” he said.

A past study by Harvard University has shown a direct relation between increased access to technology and a country’s economic growth.

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