CONSUMERS: Players in the mobile sector have decried the high taxes charged on mobile operators saying it is making mobile services less accessible to consumers.
Speaking before the Senate Committee on Information Technology yesterday officials from the Global System for Mobile Communications Association said operators in the country pay more in taxes compared to their counterparts in the region.
“Two of the most significant taxes paid by mobile operators are corporate income tax and spectrum licence fees. Kenya’s corporate tax rate (30 per cent) is above the average in Africa (27.1 per cent),” said Caroline Mbugua, GSMA Senior Policy Manager for East Africa.
She said while the law allows operators to deduct expenses incurred wholly and exclusively to generate income, mobile operators in Kenya still cannot deduct the cost of spectrum license fees despite the fact that these are a cost wholly and exclusively incurred to run the business and generate income.
However, mobile operators in other African countries including Burundi, Ethiopia, Ghana, Madagascar, Niger, Rwanda, Tanzania, and Uganda are allowed to deduct the cost of telecommunication and spectrum licence fees, according to Mbugua.
“Amend Income Tax Act for operators to be able to reduce expenses from corporation tax. This will give them flexibility and will release significant amount of capital that can be put into broadband,” she said.
GSMA Senior Economic Research Manager for East Africa, Nicholas Ficher, said the Kenyan mobile sector makes a large contribution in taxes and fees compared to its economic footprint.
Mobile sector
In 2018, mobile sector the contributed approximately Sh97 billion in taxes, 37 per cent of total market revenue, and above Sub-Saharan Africa average of 26 per cent.
“The tax contribution of the mobile sector is therefore 2.2 times its size in the economy. Mobile consumers bear 57 per cent 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,” said Ficher.
He said while mobile market revenue accounted for three per cent of Kenya’s GDP, the sector’s tax and fee payments accounted for around 6.5 per cent of government total tax revenue.
