New tax jolts mobile phone pricing

A new “radiation tax” is threatening to upset household budgets at a time when families are grappling with the rising cost of living despite the recent adoption of a less volatile method of tallying consumer price changes.

The tax is one of the sticking points in proposals by the Radiation Protection Board to beef up its revenues.

Besides proposing higher fees for its services, the board has broadened the range of items on which it can charge penalties for releasing harmful rays to the atmosphere to include mobile phone handsets, microwave ovens and transmission masts owned by telecommunications companies.

Industry players fear the new fees will dampen the recent growth in the telecommunications and consumer electronics sectors by pushing up retail prices for handsets, microwave ovens and other household items deemed to emit electromagnetic rays beyond the reach of the majority.

The board is seeking public views on the proposed levies, which some stakeholders have vowed to resist because they will mean additional taxation and a burden on consumers.

The development comes against the backdrop of international research findings that people who use phones with high radiation levels for over 10 years stand significantly higher risks of brain and salivary gland tumours.

If the proposed fees come into force, consumers buying goods such as microwave ovens and mobile handsets will have to pay an extra Sh3,000.

Students will also be charged more to access the board’s facilities during attachment.

Undergraduate students will be required to pay Sh5,000 per month while postgraduate students and those doing research will pay Sh10,000 and Sh20,000 respectively.

The board was previously only charging institutions a fee of Sh300 per year, which it has raised to Sh6,000 for secondary schools, Sh12,000 for colleges and Sh24,000 for research institutions.

The board was created by an Act of Parliament in 1980 to provide for the protection of the public and radiation workers from the dangers arising from the use of devices or material that produce ionizing radiation.

Apart from telecommunication firms and broadcasters who are supposed to pay an annual fee of Sh20,000 per mast or radio station tower, the regulator also intends to levy students on industry attachment or medical institutions using its equipment which emit electromagnetic waves.

The chairman of the Kenya Telecommunication Network Operators (KTNO), Joshua Chepkwony, says the proposed levies would translate into additional taxation for the industry which they were not ready to shoulder but would pass on to the end users if they were enforced.

Health risks

The telecommunication association has written to the Communications Commission of Kenya (CCK), asking it to protect the industry which they say is being targeted as a source of revenue by other regulatory bodies.

“Due to the far reaching implication that this proposal portends for the industry, we wish to collectively state that we are not in support of the proposed charges without first having had the benefit of a detailed justification from the Commission and the Radiation protection board,” reads the letter.

“When read in conjunction with draft safety Bill 2008, you will no doubt agree with us that these proposed charges are tantamount to the introduction of additional levies and taxes on our industry by yet another regulating authority that now seeks to claim oversight over our operations.”

The proposed fee on telecommunication masts and handsets also appears to run against a research done by the CCK and other industry associations last year which pointed out that the radio waves from masts and handsets don’t pose health risks

Mr Steve Mutoro of Kenya Residential Association (KARA) says there is no rationale for the board to levy charges on the equipment because the money collected would not be used to prevent radiation.

“The proposal is outrageous, levying the fees will only burden the tax payers as it means they will have to shoulder the proposed fees to the industry players” he said, adding, “ We will definitely mobilize our members to oppose this.”

Digital gap

Under the proposed regulations, home and industrial microwave owners and mobile handsets owners will be required to pay Sh3,000 for every microwave or a GSM, CDMA or UTMs enabled mobile phone they own to the board.

For telecommunications players, the commercial implications are dire.

Mr Alex Gakuru, the chairman of ICT consumer association of Kenya, terms the move ill advised, saying it would only stifle the mobile penetration in the country and widen the digital gap.

“We have handsets going for Sh2, 000 currently in the market, why should a government organ want to levy a fee higher than the price of the commodity?” he asked.

Safaricom, the leading telecommunication company, currently has more than 1,200 masts around the country that would be subject to the new levy if it was enforced.

It is estimated that Safaricom will be required to pay at least an additional Sh24 million per year for its masts.

In fact, this is one of the business risks the mobile firm highlighted when it was preparing to list on the stock exchange.

“Although no report has conclusively shown use of mobile telephony to be harmful, the Company cannot give assurance that further medical research will not establish credible links between radio frequency emissions of mobile handsets and/or base stations and health concerns,” the firm said in its prospectus.

Regulatory costs

The company goes on to note that radiation fears could prove to have a materially adverse effect on the company’s growth rates, customer base and ARPU.

“In addition, the company may be exposed to property depreciation claims, increased regulatory costs and/or health related claims,” it says in its prospectus.

Other affected operators include Telkom Kenya, Zain Kenya and Essar Telkom Kenya Ltd which also have their own masts, and the broadcast industry.