The Kenya Revenue Authority (KRA) has been dealt a blow after Airtime and data tax collections plummeted. The taxman had imposed a higher tax in a bid to Sh8 billion from mobile operators.
Instead, Kenyans reduced their usage of the services, resulting in a 19.8 percent drop in tax collections. KRA collected Sh7.4 billion less after the excise duty went up from 15 to 20 percent. Safaricom, Airtel and Telkom passed on the increment to its consumers , with Safaricom increasing its peak call rates per minute from Sh4.30 to Sh4.87.
According to the Kenya National Bureau of Statistics, the taxman collected Sh29.8 billion in 2021 and Sh37.2 billion in 2020.
“Excise revenue increased across all the sub-categories except for airtime which decreased by 19.8 percent from Sh37.2 billion to Sh29.8 billion,” KNBS said in the latest Economic Survey.
Airtime and data are among the highest taxed items alongside beer, spirits, cigarettes, bottled water, and financial transactions.
Apart from the excise duty, mobile telephone service consumers also pay a 16 percent value-added tax (VAT)
The excise duty increment which has been on an upward trajectory from 10 to 15 percent in 2018 and 15 to 20 percent in 2021 backfired on the taxman who was seeking to increase collections.
“Data performance in the first half of 2022 was weighed down by absorbed excise duty adjustments from August 2021 which slowed down industry momentum and price rationalisation,” Safaricom Ceo Peter Ndegwa said in the investor briefing.
A research by the GSM Association (GSMA) says that while hailed as a front runner in Africa, Kenya’s mobile industry and customers are some of the region’s most severely taxed, restricting their potential to grow further and help other economic sectors.
While mobile market revenue accounts for 3% of Kenya’s GDP, tax and fee payments make for roughly 6.5 percent of the government’s total tax revenue, according to the report.
This has sparked concerns that the tax hikes may lead to a drop in consumption and discourage innovation and jobs.
Excise duty on airtime and data has also extended across the area, raising roaming fees and increasing the cost of conducting business.