<html xmlns:v="urn:schemas-microsoft-com:vml" xmlns:o="urn:schemas-microsoft-com:office:office" xmlns:w="urn:schemas-microsoft-com:office:word" xmlns:m="http://schemas.microsoft.com/office/2004/12/omml" xmlns="http://www.w3.org/TR/REC-html40">
<head>
<meta http-equiv="Content-Type" content="text/html; charset=us-ascii">
<meta name="Generator" content="Microsoft Word 15 (filtered medium)">
<style><!--
/* Font Definitions */
@font-face
{font-family:Wingdings;
panose-1:5 0 0 0 0 0 0 0 0 0;}
@font-face
{font-family:SimSun;
panose-1:2 1 6 0 3 1 1 1 1 1;}
@font-face
{font-family:"Cambria Math";
panose-1:2 4 5 3 5 4 6 3 2 4;}
@font-face
{font-family:Calibri;
panose-1:2 15 5 2 2 2 4 3 2 4;}
@font-face
{font-family:"\@SimSun";
panose-1:2 1 6 0 3 1 1 1 1 1;}
/* Style Definitions */
p.MsoNormal, li.MsoNormal, div.MsoNormal
{margin:0cm;
margin-bottom:.0001pt;
text-align:justify;
text-justify:inter-ideograph;
font-size:10.5pt;
font-family:"Calibri",sans-serif;}
h1
{mso-style-priority:9;
mso-style-link:"Heading 1 Char";
mso-margin-top-alt:auto;
margin-right:0cm;
mso-margin-bottom-alt:auto;
margin-left:0cm;
font-size:24.0pt;
font-family:SimSun;
font-weight:bold;}
h2
{mso-style-priority:9;
mso-style-link:"Heading 2 Char";
margin-top:13.0pt;
margin-right:0cm;
margin-bottom:13.0pt;
margin-left:0cm;
text-align:justify;
text-justify:inter-ideograph;
line-height:173%;
page-break-after:avoid;
font-size:16.0pt;
font-family:"Calibri Light",sans-serif;
font-weight:bold;}
h3
{mso-style-priority:9;
mso-style-link:"Heading 3 Char";
mso-margin-top-alt:auto;
margin-right:0cm;
mso-margin-bottom-alt:auto;
margin-left:0cm;
font-size:13.5pt;
font-family:SimSun;
font-weight:bold;}
a:link, span.MsoHyperlink
{mso-style-priority:99;
color:#0563C1;
text-decoration:underline;}
a:visited, span.MsoHyperlinkFollowed
{mso-style-priority:99;
color:#954F72;
text-decoration:underline;}
p
{mso-style-priority:99;
mso-margin-top-alt:auto;
margin-right:0cm;
mso-margin-bottom-alt:auto;
margin-left:0cm;
font-size:12.0pt;
font-family:SimSun;}
span.EmailStyle17
{mso-style-type:personal-compose;
font-family:"Calibri",sans-serif;
color:windowtext;}
span.Heading1Char
{mso-style-name:"Heading 1 Char";
mso-style-priority:9;
mso-style-link:"Heading 1";
font-family:SimSun;
font-weight:bold;}
span.Heading3Char
{mso-style-name:"Heading 3 Char";
mso-style-priority:9;
mso-style-link:"Heading 3";
font-family:SimSun;
font-weight:bold;}
p.author-name, li.author-name, div.author-name
{mso-style-name:author-name;
mso-margin-top-alt:auto;
margin-right:0cm;
mso-margin-bottom-alt:auto;
margin-left:0cm;
font-size:12.0pt;
font-family:SimSun;}
p.detail-time, li.detail-time, div.detail-time
{mso-style-name:detail-time;
mso-margin-top-alt:auto;
margin-right:0cm;
mso-margin-bottom-alt:auto;
margin-left:0cm;
font-size:12.0pt;
font-family:SimSun;}
span.Heading2Char
{mso-style-name:"Heading 2 Char";
mso-style-priority:9;
mso-style-link:"Heading 2";
font-family:"Calibri Light",sans-serif;
font-weight:bold;}
span.z-TopofFormChar
{mso-style-name:"z-Top of Form Char";
mso-style-priority:99;
mso-style-link:"z-Top of Form";
font-family:"Arial",sans-serif;
display:none;}
span.z-BottomofFormChar
{mso-style-name:"z-Bottom of Form Char";
mso-style-priority:99;
mso-style-link:"z-Bottom of Form";
font-family:"Arial",sans-serif;
display:none;}
p.author-desc, li.author-desc, div.author-desc
{mso-style-name:author-desc;
mso-margin-top-alt:auto;
margin-right:0cm;
mso-margin-bottom-alt:auto;
margin-left:0cm;
font-size:12.0pt;
font-family:SimSun;}
.MsoChpDefault
{mso-style-type:export-only;
font-family:"Calibri",sans-serif;}
/* Page Definitions */
@page WordSection1
{size:612.0pt 792.0pt;
margin:70.85pt 70.85pt 70.85pt 70.85pt;}
div.WordSection1
{page:WordSection1;}
/* List Definitions */
@list l0
{mso-list-id:874779471;
mso-list-template-ids:-933728238;}
@list l0:level1
{mso-level-number-format:bullet;
mso-level-text:\F0B7;
mso-level-tab-stop:36.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Symbol;}
@list l0:level2
{mso-level-number-format:bullet;
mso-level-text:o;
mso-level-tab-stop:72.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:"Courier New";
mso-bidi-font-family:"Times New Roman";}
@list l0:level3
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:108.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l0:level4
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:144.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l0:level5
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:180.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l0:level6
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:216.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l0:level7
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:252.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l0:level8
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:288.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l0:level9
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:324.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l1
{mso-list-id:1512523717;
mso-list-template-ids:265738846;}
@list l1:level1
{mso-level-number-format:bullet;
mso-level-text:\F0B7;
mso-level-tab-stop:36.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Symbol;}
@list l1:level2
{mso-level-number-format:bullet;
mso-level-text:o;
mso-level-tab-stop:72.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:"Courier New";
mso-bidi-font-family:"Times New Roman";}
@list l1:level3
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:108.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l1:level4
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:144.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l1:level5
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:180.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l1:level6
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:216.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l1:level7
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:252.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l1:level8
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:288.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l1:level9
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:324.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l2
{mso-list-id:1826509293;
mso-list-template-ids:1235142492;}
@list l2:level1
{mso-level-number-format:bullet;
mso-level-text:\F0B7;
mso-level-tab-stop:36.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Symbol;}
@list l2:level2
{mso-level-number-format:bullet;
mso-level-text:o;
mso-level-tab-stop:72.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:"Courier New";
mso-bidi-font-family:"Times New Roman";}
@list l2:level3
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:108.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l2:level4
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:144.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l2:level5
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:180.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l2:level6
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:216.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l2:level7
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:252.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l2:level8
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:288.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
@list l2:level9
{mso-level-number-format:bullet;
mso-level-text:\F0A7;
mso-level-tab-stop:324.0pt;
mso-level-number-position:left;
text-indent:-18.0pt;
mso-ansi-font-size:10.0pt;
font-family:Wingdings;}
ol
{margin-bottom:0cm;}
ul
{margin-bottom:0cm;}
--></style><!--[if gte mso 9]><xml>
<o:shapedefaults v:ext="edit" spidmax="1026" />
</xml><![endif]--><!--[if gte mso 9]><xml>
<o:shapelayout v:ext="edit">
<o:idmap v:ext="edit" data="1" />
</o:shapelayout></xml><![endif]-->
</head>
<body lang="ZH-CN" link="#0563C1" vlink="#954F72" style="text-justify-trim:punctuation">
<div class="WordSection1">
<p class="MsoNormal"><span lang="EN-US">For those interested… or for those who disagree!<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-US"><o:p> </o:p></span></p>
<p class="MsoNormal"><span lang="EN-US"><a href="https://blog.huawei.com/2022/05/27/effects-taxing-mobile-airtime-data-bundles-kenya-2021/">https://blog.huawei.com/2022/05/27/effects-taxing-mobile-airtime-data-bundles-kenya-2021/</a><o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-US"><o:p> </o:p></span></p>
<p class="MsoNormal" align="left" style="mso-margin-top-alt:auto;margin-bottom:22.5pt;text-align:left;line-height:28.5pt;background:white">
<b><span lang="EN-US" style="font-size:24.0pt;color:#020202">The Effects of Taxing Mobile Phone Airtime & Data Bundles in Kenya in 2021<o:p></o:p></span></b></p>
<p class="MsoNormal" align="left" style="mso-margin-top-alt:auto;margin-bottom:7.5pt;text-align:left;background:white">
<span lang="EN-US">By<span style="color:#020202">Adam Lane</span><o:p></o:p></span></p>
<p class="MsoNormal" align="left" style="mso-margin-top-alt:auto;margin-bottom:36.0pt;text-align:left;background:white">
<span lang="EN-US">May 27, 2022<o:p></o:p></span></p>
<p class="MsoNormal" align="left" style="mso-margin-top-alt:auto;margin-bottom:18.0pt;text-align:left;line-height:18.0pt;background:white">
<span lang="EN-US" style="font-size:13.5pt;color:#020202">In 2021 Kenya raised excise duty from 15% to 20% in a bid to generate more tax revenue. This affected both the cost of making calls (“airtime”) and the cost of Internet (mobile “data bundles” or fixed
broadband subscriptions), as telecoms network operators increased their prices to pass the costs onto their consumers.<o:p></o:p></span></p>
<p class="MsoNormal" align="left" style="mso-margin-top-alt:auto;margin-bottom:18.0pt;text-align:left;line-height:18.0pt;background:white">
<span lang="EN-US" style="font-size:13.5pt;color:#020202">In this post, I look at the effect this has had on Internet adoption, how people use the Internet in Kenya, and broader economic development.<o:p></o:p></span></p>
<p class="MsoNormal" align="left" style="mso-margin-top-alt:auto;margin-bottom:18.0pt;text-align:left;line-height:18.0pt;background:white">
<b><span lang="EN-US" style="font-size:15.0pt;color:#020202">The opposite of what was intended<o:p></o:p></span></b></p>
<p class="MsoNormal" align="left" style="mso-margin-top-alt:auto;margin-bottom:18.0pt;text-align:left;line-height:18.0pt;background:white">
<span lang="EN-US" style="font-size:13.5pt;color:#020202">Recent statistics from the Kenya National Bureau of Statistics, reported by <a href="https://www.businessdailyafrica.com/bd/economy/kra-loses-sh7-billion-on-higher-airtime-data-taxes-3821252"><i><span style="color:#4395FF">Business
Daily Africa</span></i></a>, reveal that tax collections actually decreased by 20%, instead of the predicted increase of 22%. Interestingly this is the opposite of the effect when a previous increase from 10% to 15% in 2018 saw tax revenue increase by a massive
60%. However, that came at a time of rapid growth in Kenyans getting online, which has now slowed, and it occurred during a period of economic growth.<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-US"><o:p> </o:p></span></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;background:white"><span lang="EN-US" style="font-size:13.5pt;font-family:"Calibri",sans-serif;color:#020202">Despite a trend of prices declining year-on-year generally, the tax-inspired higher prices in 2021
came at a time of economic shock during the pandemic, which affected the earnings of many Kenyans and led to consumers limiting their calls and Internet usage.<o:p></o:p></span></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;background:white;overflow-wrap: break-word;font-variant-ligatures: normal;font-variant-caps: normal;orphans: 2;text-align:start;widows: 2;-webkit-text-stroke-width: 0px;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;word-spacing:0px">
<span lang="EN-US" style="font-size:13.5pt;font-family:"Calibri",sans-serif;color:#020202">This in turn caused the revenue growth of telecommunications companies to slow and reduced tax collections.<o:p></o:p></span></p>
<h3 style="margin-bottom:18.0pt;line-height:18.0pt;background:white;overflow-wrap: break-word;font-variant-ligatures: normal;font-variant-caps: normal;orphans: 2;text-align:start;widows: 2;-webkit-text-stroke-width: 0px;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;word-spacing:0px">
<strong><span lang="EN-US" style="font-size:15.0pt;font-family:"Calibri",sans-serif;color:#020202">The reason for excise duties</span></strong><span lang="EN-US" style="font-size:15.0pt;font-family:"Calibri",sans-serif;color:#020202"><o:p></o:p></span></h3>
<p style="margin-bottom:18.0pt;line-height:18.0pt;background:white;overflow-wrap: break-word;font-variant-ligatures: normal;font-variant-caps: normal;orphans: 2;text-align:start;widows: 2;-webkit-text-stroke-width: 0px;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;word-spacing:0px">
<span lang="EN-US" style="font-size:13.5pt;font-family:"Calibri",sans-serif;color:#020202">Excise duties are generally seen as “sin taxes” with the dual aim of reducing demand for products that have negative social or environmental impacts and generating revenue
that can be used to fund activities to offset such negative social or environmental impacts. Typical excise duties cover alcohol, betting, or tobacco products across the world, though in Kenya (and many other countries) they have been applied for airtime and
also mobile money transactions, even though these overwhelmingly have positive social and economic impacts. Indeed, they stimulate economic growth and create indirect social and environmental benefits.<o:p></o:p></span></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;background:white;overflow-wrap: break-word;font-variant-ligatures: normal;font-variant-caps: normal;orphans: 2;text-align:start;widows: 2;-webkit-text-stroke-width: 0px;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;word-spacing:0px">
<span lang="EN-US" style="font-size:13.5pt;font-family:"Calibri",sans-serif;color:#020202">In fact, in Kenya, airtime and data have become the biggest source of excise taxes ahead of beer, spirits, cigarettes, bottled water, and financial transactions. This
is in addition to multiple other taxes on ICT, particularly the burden of paying VAT (currently 16%, though it was reduced to 14% for a year during the pandemic). VAT is also applicable to electronic devices, along with a further 2% Railway Development Levy
and 3.5% Import Declaration Levy.<o:p></o:p></span></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;background:white;overflow-wrap: break-word;font-variant-ligatures: normal;font-variant-caps: normal;orphans: 2;text-align:start;widows: 2;-webkit-text-stroke-width: 0px;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;word-spacing:0px">
<span lang="EN-US" style="font-size:13.5pt;font-family:"Calibri",sans-serif;color:#020202">There is also a 12% excise duty on mobile money payments and various license fees on telecommunications companies.<o:p></o:p></span></p>
<h3 style="margin-bottom:18.0pt;line-height:18.0pt;background:white"><strong><span lang="EN-US" style="font-size:15.0pt;font-family:"Calibri",sans-serif;color:#020202">Negative impact</span></strong><span lang="EN-US" style="font-size:15.0pt;font-family:"Calibri",sans-serif;color:#020202"><o:p></o:p></span></h3>
<p style="margin-bottom:18.0pt;line-height:18.0pt;background:white;overflow-wrap: break-word;font-variant-ligatures: normal;font-variant-caps: normal;orphans: 2;text-align:start;widows: 2;-webkit-text-stroke-width: 0px;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;word-spacing:0px">
<span lang="EN-US" style="font-size:13.5pt;font-family:"Calibri",sans-serif;color:#020202">Such taxes not only hinder usage, but can also stifle innovation and overall development, as growth in ICT usage correlates with economic growth. In a wide-ranging study,
the International Telecommunications Union (<a href="https://www.itu.int/en/Pages/default.aspx"><span style="color:#4395FF">ITU)</span></a> found that an increase of 10% in mobile broadband subscriber penetration yields an increase of 1.5% in gross domestic
product (GDP).<o:p></o:p></span></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;background:white;overflow-wrap: break-word;font-variant-ligatures: normal;font-variant-caps: normal;orphans: 2;text-align:start;widows: 2;-webkit-text-stroke-width: 0px;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;word-spacing:0px">
<span lang="EN-US" style="font-size:13.5pt;font-family:"Calibri",sans-serif;color:#020202">The impact of mobile broadband is more powerful still in developing economies at 2%.<o:p></o:p></span></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;background:white;overflow-wrap: break-word;font-variant-ligatures: normal;font-variant-caps: normal;orphans: 2;text-align:start;widows: 2;-webkit-text-stroke-width: 0px;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;word-spacing:0px">
<span lang="EN-US" style="font-size:13.5pt;font-family:"Calibri",sans-serif;color:#020202">Moreover, ITU economists have more recently established that higher mobile adoption also mitigated the most damaging economic impacts of the COVID-19 pandemic.<o:p></o:p></span></p>
<p><i><span lang="EN-US" style="font-size:21.0pt;font-family:"Calibri",sans-serif">The ITU found that an increase of 10% in mobile broadband subscriber penetration yields an increase of 1.5% in GDP.<o:p></o:p></span></i></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;background:white;overflow-wrap: break-word;font-variant-ligatures: normal;font-variant-caps: normal;orphans: 2;text-align:start;widows: 2;-webkit-text-stroke-width: 0px;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;word-spacing:0px">
<span lang="EN-US" style="font-size:13.5pt;font-family:"Calibri",sans-serif;color:#020202">During the pandemic, the ICT sector was one of the few sectors in Kenya that saw growth in 2020 (ICT was the second fastest growing sector in the economy that year),
and played a crucial role in enabling Kenyans to work, trade, study, and get health information online. Yet in 2021, the telecommunications industry’s growth slowed to 9.7% from 12.6% in 2020 (<a href="https://www.knbs.or.ke/wp-content/uploads/2022/05/2022-Economic-Survey1.pdf"><span style="color:#4395FF">source</span></a>,
Table 2.4) – the increase in taxation that came into effect from July 2021 is a likely contributing factor to this trend.<o:p></o:p></span></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;background:white;overflow-wrap: break-word;font-variant-ligatures: normal;font-variant-caps: normal;orphans: 2;text-align:start;widows: 2;-webkit-text-stroke-width: 0px;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;word-spacing:0px">
<span lang="EN-US" style="font-size:13.5pt;font-family:"Calibri",sans-serif;color:#020202">As <a href="https://www.businessdailyafrica.com/bd/economy/kra-loses-sh7-billion-on-higher-airtime-data-taxes-3821252"><em><span style="font-family:"Calibri",sans-serif;color:#4395FF">Business
Daily</span></em></a> reports, “Safaricom said although its data income grew impressively by 8.1% to Sh48.4 billion (approx. US$411.2 million), the growth was dampened in the second half of its financial year to March due to the new taxes. ‘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.”<o:p></o:p></span></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;background:white;overflow-wrap: break-word;font-variant-ligatures: normal;font-variant-caps: normal;orphans: 2;text-align:start;widows: 2;-webkit-text-stroke-width: 0px;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;word-spacing:0px">
<span lang="EN-US" style="font-size:13.5pt;font-family:"Calibri",sans-serif;color:#020202">A <a href="https://www.gsma.com/publicpolicy/resources/mobile-taxation-in-kenya-accelerating-digital-development/mobile-taxation-in-kenya"><span style="color:#4395FF">March
2020 study</span></a> by <a href="http://gsma.com/"><span style="color:#4395FF">GSMA</span></a> reports that Kenya’s mobile industry and consumers, despite being seen as a frontrunner in Africa, are one the region’s most heavily taxed, inhibiting its potential
to grow further and support other economic sectors. It states that while mobile market revenue accounts for 3% of Kenya’s GDP, the sector’s tax and fee payments account for around 6.5% of the government’s total tax revenue.<o:p></o:p></span></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;background:white;overflow-wrap: break-word;font-variant-ligatures: normal;font-variant-caps: normal;orphans: 2;text-align:start;widows: 2;-webkit-text-stroke-width: 0px;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;word-spacing:0px">
<span lang="EN-US" style="font-size:13.5pt;font-family:"Calibri",sans-serif;color:#020202">At the time, GSMA analysed the potential detrimental effects of a hypothetical increase of the excise duty on mobile services from 15% to 18%, finding that by 2025, tax
revenue would decline by US$24 million, wider investment would decline by US$59 million, subscriber numbers would be 950,000 lower than otherwise, the sector revenue would be US$83 million lower, and GDP would be US$268 million lower.<o:p></o:p></span></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;background:white;overflow-wrap: break-word;font-variant-ligatures: normal;font-variant-caps: normal;orphans: 2;text-align:start;widows: 2;-webkit-text-stroke-width: 0px;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;word-spacing:0px">
<span lang="EN-US" style="font-size:13.5pt;font-family:"Calibri",sans-serif;color:#020202">Last year in Kenya, the 5% tax increase led to a drop of US$63 million in mobile services excise tax revenue compared to 2020.<o:p></o:p></span></p>
<p><i><span lang="EN-US" style="font-size:21.0pt;font-family:"Calibri",sans-serif">Last year in Kenya, the 5% tax increase led to a drop of US$63 million in mobile services excise tax revenue compared to 2020.<o:p></o:p></span></i></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;background:white;overflow-wrap: break-word;font-variant-ligatures: normal;font-variant-caps: normal;orphans: 2;text-align:start;widows: 2;-webkit-text-stroke-width: 0px;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;word-spacing:0px">
<span lang="EN-US" style="font-size:13.5pt;font-family:"Calibri",sans-serif;color:#020202">Increasing taxation on mobile and Internet services is a common trend in Africa. In Uganda, excise duty on airtime as well as Internet data is 12%, in addition to 18%
VAT. In Tanzania, excise on airtime and Internet is 17%, in addition to 18% VAT. However, recent increases in mobile money taxes were watered down after public pushback, and in 2021 the Finance Minister proposed removing VAT on smartphones, “to encourage the
use of telecommunications services to achieve the target of 80% of Internet users by 2025 from the current 46%.”<o:p></o:p></span></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;background:white;overflow-wrap: break-word;font-variant-ligatures: normal;font-variant-caps: normal;orphans: 2;text-align:start;widows: 2;-webkit-text-stroke-width: 0px;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;word-spacing:0px">
<span lang="EN-US" style="font-size:13.5pt;font-family:"Calibri",sans-serif;color:#020202">Hopefully the evidence from Kenya—and maybe similar evidence related to smartphone sales that may come out of Tanzania—will make countries think twice about whether and
how they tax mobile services and devices, particularly if it may conflict their strategies for achieving digital inclusion or a digital economy.<o:p></o:p></span></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;background:white;overflow-wrap: break-word;font-variant-ligatures: normal;font-variant-caps: normal;orphans: 2;text-align:start;widows: 2;-webkit-text-stroke-width: 0px;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;word-spacing:0px">
<span lang="EN-US" style="font-size:13.5pt;font-family:"Calibri",sans-serif;color:#020202">In fact, there is growing economic evidence that the social benefits of digital economic development and closing digital divides exceeds that of private sector benefits.
Current best-practice in policy discussions is for governments to increasingly support digital infrastructure rollout and adoption through fiscal instruments.<o:p></o:p></span></p>
<h3 style="margin-bottom:18.0pt;line-height:18.0pt;background:white;overflow-wrap: break-word;font-variant-ligatures: normal;font-variant-caps: normal;orphans: 2;text-align:start;widows: 2;-webkit-text-stroke-width: 0px;text-decoration-thickness: initial;text-decoration-style: initial;text-decoration-color: initial;word-spacing:0px">
<strong><span lang="EN-US" style="font-size:15.0pt;font-family:"Calibri",sans-serif;color:#020202">Slowing growth in mobile Internet adoption</span></strong><span lang="EN-US" style="font-size:15.0pt;font-family:"Calibri",sans-serif;color:#020202"><o:p></o:p></span></h3>
<p style="margin-bottom:18.0pt;line-height:18.0pt;vertical-align:top"><span lang="EN-US" style="font-family:"Calibri",sans-serif;color:#020202">When COVID-19 hit in Kenya, there was initially an increase in mobile broadband connections (up by 8% from March
2020 to September 2020) and smartphone connections (up by 20% from March 2020 to September 2020), compared to their trend line of around 5% growth. But today, only around 60% of Kenyans use mobile broadband on a smartphone, with the high cost of smartphones
frequently cited as the biggest barrier.<o:p></o:p></span></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;vertical-align:top;overflow-wrap: break-word">
<span lang="EN-US" style="font-family:"Calibri",sans-serif;color:#020202">The price of smartphones has not declined significantly in Kenya over the last several years, having reached a limit of how much cheaper they can be manufactured from their component
parts. It might be that only variable costs, such as shipping, distribution, marketing or taxation can be reduced to make smartphones more affordable. Taxation must be seriously considered.<o:p></o:p></span></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;vertical-align:top;overflow-wrap: break-word">
<span lang="EN-US" style="font-family:"Calibri",sans-serif;color:#020202">Even as broadband connection growth stagnates, data usage is also very low in Kenya, with the primary limiting factor being cost. For example, Safaricom is the largest mobile network
operator in Kenya, with around two thirds of the market share. Of their 33 million active data customers, only 12.5 million use more than 100 MB a month including 7.7 million who use 1 GB a month. These statistics are per month, not per day, which might shock
many people who would easily use 100 MB a day, and in some cases, 1 GB a day.<o:p></o:p></span></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;vertical-align:top;overflow-wrap: break-word">
<span lang="EN-US" style="font-family:"Calibri",sans-serif;color:#020202">This is particularly noteworthy when the vast majority of mobile users do not have a fixed Internet connection at their home or workplace (though some may use data from other networks
on a second SIM card), and thus this mobile data usage is their entire usage. Even though Safaricom and other operators are reducing data costs year on year, the costs are still too high for many, with taxation a key part of this.<o:p></o:p></span></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;vertical-align:top;overflow-wrap: break-word">
<span lang="EN-US" style="font-family:"Calibri",sans-serif;color:#020202">High taxation on airtime, Internet data, and smartphones is a critical factor restricting deepening penetration, faster growth, and the greater impact of broadband in Kenya. The result
is that those who could benefit most from using the Internet — those in more remote areas, those who cannot afford transport, those without employment, those without choice in buying goods and so on — are unable to afford smartphones and unable to use as much
Internet as they would like, and are thus unable to improve their lives, or contribute to overall economic growth.<o:p></o:p></span></p>
<p style="margin-bottom:18.0pt;line-height:18.0pt;vertical-align:top;overflow-wrap: break-word">
<span lang="EN-US" style="font-family:"Calibri",sans-serif;color:#020202">When considering taxation, it is crucial to identify an approach that balances economic growth, quality of life, and tax revenue.<o:p></o:p></span></p>
<h3 style="margin-bottom:18.0pt;line-height:18.0pt;vertical-align:top;overflow-wrap: break-word">
<span lang="EN-US" style="font-size:15.0pt;font-family:"Calibri",sans-serif;color:#020202">Further Reading<o:p></o:p></span></h3>
<ul type="disc">
<li class="MsoNormal" style="color:#020202;mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;text-align:left;line-height:18.0pt;mso-list:l1 level1 lfo1;vertical-align:top;list-style:initial">
<span lang="EN-US"><a href="https://blog.huawei.com/2022/01/11/gigabite-index-connectivity/"><strong><span style="font-family:"Calibri",sans-serif;color:#0000EE">Introducing the “Gigabite” Index</span></strong></a> [article examining and comparing the cost
of Internet connections against the Big Mac in various countries]</span><span lang="EN-US" style="font-size:12.0pt"><o:p></o:p></span></li><li class="MsoNormal" style="color:#020202;mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;text-align:left;line-height:18.0pt;mso-list:l1 level1 lfo1;vertical-align:top;list-style:initial">
<span lang="EN-US"><a href="https://blog.huawei.com/2021/09/06/why-kenya-needs-5g/"><strong><span style="font-family:"Calibri",sans-serif;color:#0000EE">Why Kenya Needs 5G</span></strong></a> [article]<o:p></o:p></span></li><li class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;text-align:left;line-height:18.0pt;mso-list:l1 level1 lfo1;vertical-align:top;list-style:initial">
<strong><span lang="EN-US" style="font-family:"Calibri",sans-serif;color:#020202"><a href="https://blog.huawei.com/2021/07/14/youth-covid19-kenya-why-impact-technology-limited/"><span style="color:#0000EE">Youth & COVID-19 in Kenya: Why the Impact of Technology
Was Limited</span></a> </span></strong><span lang="EN-US" style="color:#020202">[article]\</span><span lang="EN-US"><o:p></o:p></span></li></ul>
<p class="MsoNormal"><span lang="EN-US"><o:p> </o:p></span></p>
</div>
</body>
</html>