This archive report was first published on 17 July 2021.
July 17, 2021
Kenya and Tanzania have followed Uganda's lead in introducing new taxes on telecommunications services, with Kenyans facing increased data costs due to an excise duty hike. The Treasury's decision to impose a 12% tax on airtime has been met with criticism, with experts warning that it may lead to a drop in aggregate revenues for the sector.
These taxes are partly a result of the fiscal crisis governments in the region are facing. However, targeting the telecommunications sector may have unintended consequences, including stifling innovation and hindering economic growth.
With the majority of people confined at home during the current lockdowns, telecommunications services are no longer a luxury but an essential service. Imposing taxes that make the service less affordable is detrimental, as it may lead to a ripple effect of negative consequences.
Mobile telephony and mobile money have been transformational for Africa, accelerating economic velocity and providing access to formal financial services for millions. However, taxing mobile telephony and its associated services raises questions about the fairness of the tax and its potential impact on the sector.
The double-digit tax rates imposed on the sector are also a concern, with experts questioning the value created by taxing mobile money transactions. Unless well-coordinated, taxes on the sector can also disrupt regional initiatives such as the One Network Area.
