Tax cut boosts Kenyan handset sales

Mobile handset sales in Kenya have soared by 200% following the government's 2009 decision to slash the 16% value-added tax (VAT) levied on handset sales, reports IT News Africa.

Deloitte undertook the research for the GSMA as part of a larger global benchmarking study, the full data of which will be published later this year.

Gabriel Solomon, GSMA head of regulatory policy, says: “Mobile operators will contribute 33% more in tax this year than they did prior to the handset tax slash, and will contribute around 8% of Kenya's GDP this year. We call on all African governments to consider abolishing handset taxes, and follow the successful example of Kenya.”

Telecom Paper states the mobile industry, as a whole, employs almost 250 000 people in Kenya.

However, despite the tax cuts, mobile taxation in Kenya still remains just above the average across sub-Saharan Africa, as a 10% excise duty and VAT on airtime are still levied.

"The report's findings indicate that consumers, particularly in developing countries, are price-sensitive, and that tax cuts could boost consumption of mobile services," says Chris Williams, Deloitte Telecoms partner, in a Market Watch report.

Deloitte research also found that a new type of tax is emerging in Africa: the 'Surtax on International Inbound Call Termination' (SIIT), which centrally fixes the prices that operators can charge when terminating international inbound calls. The SIIT distorts price competition, which has a negative impact on business and consumers.