Telkom Kenya has urged Parliament to block the increase of excise duty on internet data charges, mobile financial services, and imported SIM cards arguing it will negatively impact the digitisation of the economy.
The telco told the National Assembly’s Finance and National Planning committee that the proposals in the Finance Bill, 2024 will have knockoff effects on the telecommunication sector and the economy.
The Treasury is proposing to amend the Excise Duty Act to increase excise duty on voice and internet data charges from 15 percent to 20 percent.
The Bill also seeks to increase excise duty on fees charged for mobile financial services from 15 to 20 percent. It further seeks to amend the Miscellaneous Fees and Levies Act to introduce an eco-levy at the rate of Sh150 per kilogramme on all articles of plastic packaging materials.
“The increase from 15 percent to 20 percent just one year after the reduction goes against the government agenda of inclusion and digitisation through the provision of affordable mobile connectivity and data services,” said Mr Mugo Kibati, the chief executive of Telkom Kenya.
“This tax negatively affects cash flows and revenues of mobile operators, therefore, discouraging rollout and denying consumers price discounts and high quality that come with greater investment into the sector.”
Mr Allan Wainaina, the chief finance officer who represented Mr Kibati told MPs that the increment of the prevailing excise tax comes with greater investment into the sector.
Telkom Kenya Limited asked the committee chaired by Molo MP Kuria Kimani to maintain the excise duty at the current level of 15 percent with a plan to reduce it over time to zero or near zero.
Mr Wainaina asked MPs to repeal the existing Sh50 excise tax imposed on imported mobile phone SIM cards.
“It is our submission that the existing Sh50 excise tax imposed on imported mobile phones SIM cards should be removed to encourage uptake of telecommunications services,” said Mr Wainaina.
“The 10 percent excise tax on imported mobile devices should be gradually phased out.”
Telkom Kenya said the proposed increase of import declaration fee (IDF) from 2.5 percent to three percent will result in increased SIM cards and capital expenditure costs.
The telco argued the IDF increase will add on to consumer costs for subscription to mobile services, and acquisition of mobile devices.
“The increased costs of network infrastructure will also negatively affect both consumers and investors thereby compromising the government agenda for digitisation of government services and increased uptake of ICT services for both economic and social development for the population.
Mr Kimani said the committee is of the view that the country should continue making progress in the telecommunications sector.
“We reduced excise duty rates for mobile phones and manufacturers have been able to assemble cheap phones retailing at Sh9,000 and they cannot satisfy the local market,” Mr Kimani said.
