The increment is contained in President Uhuru Kenyatta’s proposal to Parliament after his remarks last week that his administration wants to balance between short-term pain and long-term gain.
This means that Sh100 airtime that currently attracts Sh10 tax will now see the Treasury earn an extra Sh5.
The increase in excise duty may prompt telecommunication operators to pass on the burden to subscribers, leading to increased prices.
Mobile phone subscribers look set to pay more for airtime and data services as the government intends to increase excise duty on airtime from the current 10 per cent to 15 per cent.
The increment is contained in President Uhuru Kenyatta’s proposal to Parliament after his remarks last week that his administration wants to balance between short-term pain and long-term gain.
“Telephone and Internet data services shall be charged excise duty at a rate of 15 per cent of their excisable value,” recommends the President.
This means that Sh100 airtime that currently attracts Sh10 tax will now see the Treasury earn an extra Sh5.
The increase in excise duty may prompt telecommunication operators to pass on the burden to subscribers, leading to increased prices.
Alternatively, they may absorb the charge and deny the firms room to make further cuts on their prices.
Airtel Kenya, the second largest by market share, recently cut its calling rate from on-net of Sh3 and off-net of Sh4 per minute to a flat rate of Sh3 per minute across networks, but Safaricom, the market leader, retained its pricing saying that it will not to be drawn into the price wars.
This new proposal comes days after Safaricom #ticker:SCOM cut its Internet charges for various bands and even introduced free Whatsapp services valid for the period of the data bundles.
The telco, with a 67 per cent market share booked Sh95.64 billion voice revenue in the financial year ended March 2018, up from Sh93.46 billion in the previous financial year. Mobile data revenue grew from Sh29.3 billion to Sh36.36 billion during the period.
This means the State will generate at least Sh4.78 billion from Safaricom voice service and Sh1.82 billion from customers’ use of mobile data.
The tax increase comes at a time when subscribers are also paying increased fee on mobile money transfer services after the government raised excise duty from 10 per cent to 20 per cent in July to fund Universal Health Care programme.
The tax is set to affect over 44.1 million subscribers, going by the figure on mobile subscribers contained in Communications Authority of Kenya third quarter report covering up to March 2018.
During this period, the total mobile voice traffic grew by 8.2 per cent to record 12.7 billion minutes from 11.8 billion minutes recorded in the previous quarter.
Total data and Internet subscriptions grew by 8.2 per cent to 36.1 million subscriptions from 33.3 million subscriptions the previous quarter.
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