The Finance Act, 2022, has been in deliberations for a couple of months. It covers a lot of issues regarding taxing products and services, including those that are available locally or imported. Following an extended assessment over the month of April, the law proposed that the changes introduced therein would go live on July 1, which is tomorrow.
Now, consumers, such as phone buyers, should now be aware that they will have to pay more for the handhelds because the Act proposes a 10 percent additional tax (excise duty) on the importation of phones. There is also an additional excise duty of KES 50 for every imported SIM card.
To shed light on this development, here are some numbers regarding SIM card and phone penetration in Kenya based on data by the CA.
As of March 2022, there were 64.9 million active SIM subscriptions in Kenya. This is a drop from 65.1 million subscriptions that were recorded in the previous quarters. This numbers, nonetheless, mean that mobile penetration is at 131.4 percent.
The number of smartphones and feature phones connected to mobile networks in Kenya is 26.5 million and 33.6 million, respectively.
This means that the penetration rate of smartphones is at 54.6 percent, whereas that of feature phones is at 69.2 percent.
The new tax
It should be noted that the additional tax to the said devices were not part of the Finance Act, 2022. The new proposal was only made in May as MPs scrutinized the bill.
The tax has also been defended as a channel for the government to raise more revenues. It does not seek to protect local industries that make phones, which, to date, do no exist locally.
Since all phones that Kenyans use are imported, the new tax will affect any phone purchase made by locals.
Lastly, Kenyans seeking to replace a SIM card, or register a new one, will pay more for the service (KES 50).