High Taxes on Kenyan Mobile Market Hurting Growth – GSMA Report

mobile phone kenya

The mobile market in Kenya has registered growth year on year. Thanks to the proliferation of fast 4G network and the extended use of smartphones in the country. You can also add the continued use of fixed data options like fiber to the home which is offered by Safaricom, Zuku, JTL and many more.

However, although accessing the Internet seems relatively easy in the country, it is rather expensive. This is thanks to the taxes levied on the mobile market and a GSMA report highlights that.

Kenyan mobile operators generated $2.6 billion in revenue in 2018 which is the 4th biggest market in bub-Saharan Africa. There were 27.2 million unique subscribers in Kenya, 25.8% unique broadband penetration and 8.9% 4G penetration in the country in 2019.

According to GSMA, mobile tax contribution of Kenya is 37% of the total market revenue, which is highest in the sample they took. In comparison, the tax contribution relative to revenue in areas like sub-Saharan Africa, Europe, and Latin America is 26%, 21%, and 18% respectively.

Kenya’s mobile-specific taxes are also quite high which is equivalent to 15% of the total mobile sector revenue, which is higher than the sub-Saharan average of 10%. Other regions like Europe and Latin America hover at 4%.  Kenya mobile consumers also pay the highest tax contribution of the total taxes levied on the mobile sector revenue with 21% of the total. The sub-Saharan average is 14% in comparison and it is as low as 11% in Latin America.

Kenyans pay 57% of the tax contribution which is thanks to the excise duties levied on mobile money services and mobile money. GSMA says that this high tax contribution undermines the affordability of mobile services, which limits the benefits of increased mobile connectivity and digital inclusion. The Finance Act 2018, for example, implemented a number of tax increases on mobile data, SMS, voice calls and fixed internet services.

GSMA did a hypothetical model of the impacts of increasing mobile excise duties where if excise duty was increased from 15% to 18%, there will be a drop in tax revenue, lower mobile market revenue, reduced investment, reduced data usage, contraction of GDP, job losses and negative impact on other sectors.