Telephone and internet data services will be spared from higher excise taxes if a new parliamentary report is adopted, hurting the Treasury’s plans to raise extra money from the telecommunication sector.
The National Assembly Finance and National Planning Committee has frozen exchequer plans to lift excise duty and telephone services from the current 15 to 20 percent following public submissions opposing the move.
Cabinet Secretary to the National Treasury had previously defended the proposal terming it a standardisation of excise duty rates on various goods and services, which are mostly set at 20 percent.
The Finance and National Planning Committee says passing a higher rate of excise duty on the services would make essential communication services less affordable to most Kenyans.
“The Committee proposes dropping this proposal, as the increased tax burden could make essential communication services less affordable for many Kenyans, particularly in low-income and rural areas,” the Kuria Kimani-led committee said in its report on the consideration of the Tax Laws (Amendment) Bill, 2024.
“This could exacerbate the digital divide, hindering access to information, education, and business opportunities that are increasingly dependent on the internet. Additionally, it could strain businesses that rely on these services for operations, potentially slowing down economic growth and technological advancement.”
Various stakeholders, including telecoms operators and digital firms, opposed higher excise duty on telephone and data services noting higher taxes on the supplies would claw back gains made towards creating a thriving digital economy in the country.
Leading telecoms operator Safaricom for instance argued a higher rate of excise duty on telephone and internet data services would hurt the uptake of digital jobs for the youth.
“Delete the clause and retain the current rate of 15 percent because maintaining the excise duty rate at 15 percent will promote the industry’s stability and predictability efforts, digital inclusivity, and increased uptake of online jobs thus increasing employment opportunities for the youth. On the other hand, increasing excise duty rate will negatively impact telephone and internet data services usage in Kenya as most Kenyans will find it expensive,” Safaricom said in submissions to Parliament.
Total SIM/mobile subscriptions topped 68.8 million in the quarter ended June 2024 from a flat 68 million in March while mobile data subscriptions were up 2.5 percent in the same period to 52.5 million according to statistics from the Communication Authority of Kenya (CA).
The penetration of mobile subscriptions stood at 133.7 percent at the end of June.
Data usage is further mirrored by a higher number of smartphones, usually 4 G-enabled devices, whose number rose by 3.1 percent in the three months to 35.2 million from 34.1 million previously.
“The telecommunications sub-sector in the country experienced significant growth during the 2023/24 financial year attributed to expansion of telecom infrastructure and increased adoption of smartphone services.
