Top mobile phone manufacturers operating in Kenya have come together urging Kenya’s National Assembly’s Committee on Finance, Planning and Trade to reconsider imposing the 16% value added tax on mobile phones.
The organizations consisted of iHub, Intel, Microsoft,Nokia, Samsung, Huawei and GSMA among others. The firms met Friday August 16 and argued that the best source of government revenue comes from a highly skilled and productive workforce, rather than taxing the very productivity inputs responsible for Kenya’s recent emergence as a hub for world class innovation on the mobile platform.
Their meeting, like their counterparts in Ghana, seek to reverse the government’s desicion to impose a 16%
In 2009, the VAT exemption on mobile devices was supported by the Kenyan Government with the view to increasing subscriber penetration and driving down the cost of ownership so that more Kenyan’s could benefit from mobile technology.Since the exemption, Kenya has experienced a 25% increase in mobile penetration, and the correlation between growing mobile subscribers and economic growth is well established by the World Bank, McKinsey, GSMA and others.
As a general rule, increasing mobile penetration by 10% yields an estimated 1.2% growth in GDP across the economy.
The proposed amendment to the Value Added Tax Bill runs the risk of crippling Kenya’s economic momentum by dealing a devastating blow to a nascent digital economy driven by young and highly skilled Kenyan information workers with the potential of creating many more break-thorough innovations and high paying IT jobs.
Today, Kenyan developers are broadly recognized among some of the most innovative thinkers, tackling some of Africa’s biggest challenges through technology. We should empower and support these young people, not undermine their creativity with a tax.