#M360Africa:African Governments should reduce taxes on Smartphone to drive digital inclusion

Many African Governments place heavy taxation on imported mobile handsets therefore derailing digital inclusion especially in rural parts of Africa. There is need for governments to reduce taxes on smartphones and compel mobile phone operators to roll out high speed Internet in remote areas to serve a huge popula¬tion unable to access mobile phone services.

This was said Kenechi Okeleke Senior Analyst at GSMA during the GSMA Mobile 360- Africa in Dar-es-Salaam, Tanzania.

“By increasing the cost to consumers, the tax will adversely affect adoption of mobile, especially among vast swaths of the unconnected population in lower income groups. Addressing the affordability barrier requires the creation of policy frameworks which reduce sector-specific tax and fees on mobile to align them with those that apply to other standard goods and services,” he said.

Through the reduction of taxes on smartphones, there is the potential to stimulate investment in extending connectivity, especially in rural areas; increase mobile service adoption; deliver economic growth; and increase government tax revenues in the medium term. A GSMA study on the effects of reforms to sector-specific tax and fees in a number of countries shows increases in mobile adoption and GDP growth in 2020, relative to a scenario with no tax reform.

In Kenya for instance, more than 2.7 million Ke­nyans are off the network despite an influx of cheaper phones in the country. Some 700,000 people in 164 sub­locations, are totally locked out of mo­bile network coverage accord­ing to the 2016 Information Communication Technology (ICT) access gaps study, com­missioned by Communica­tions Authority of Kenya CA).

Mobile operators have claimed such areas are not commercially viable. The ICT ministry had stated earlier that they were looking at options of reducing taxes based on volumes of hand­ sets guaranteed for sale in the market or a blanket ban on the levies on devices.

CS Joe Mucheru had said that the ministry was looking at the options that would ultimately lead to making the devices af­fordable, either by offering tax incentives but the decision was open to but not firmed up.

In 2009 when President Uhuru Kenyatta, was the Minister of Finance, he had exempted mobile phones from VAT in the 2009 Budget speech as a strategy to deepen use of mobile phones and related services such as mobile money, m-commerce and apps development. However, this was watered down and In 2014, the ministry said it would craft a new policy that will set maximum cost of smartphones shipped into the country, expected to compel mobile phone makers to sig­nificantly lower prices of the devices.

Sector-specific taxes, such as airtime excise and SIM taxes, imposed in developing countries on both consumers and mobile operators affect the affordability of services, and reduce incentives for investment and rollout in rural, less profitable areas.