Awori wants 18% phone tax scrapped
Jul 28, 2009
The information and communication technology (ICT) ministry is discussing with the finance ministry to scrap off the 18% Value Added Tax on mobile phones.
By David Mugabe
The information and communication technology (ICT) ministry is discussing with the finance ministry to scrap off the 18% Value Added Tax on mobile phones.
The move is expected to increase access to phones by some of the poorest communities across the country. “I say so because if we do not respond accordingly, those who live near the border will just cross to Tanzania or Kenya and pick up phones from there and we lose the taxes,†said Aggrey Awori, the ICT minister. Uganda charges the highest taxes on phones and related services.
Kenya scrapped VAT on mobile phones, the move Awori wants harmonised across the region. “In the very near future, probably in the next budget, there will be no 18%,†said Awori, while commissioning the Zain and Ericsson Lake Victoria rescue project yesterday.
Phone manufacturers have urged the Government to scrap the 18% VAT on mobile phones in order to increase usage among the population. They argue that the biggest barrier to increased mobile phone use is the handset price.
According to research, a more favourable tax regime on the continent would see an additional 43 million mobile phone users. But increased telecommunications penetration has far-reaching consequences for the economy. It is estimated that every 10% increase in mobile penetration leads to a 1.2% point increase in economic growth.
An additional disincentive to mobile phone usage is the 12% excise duty on airtime. Uganda is a land-locked country with less than adequate transport and general infrastructure and as a result the cost of business is higher than its regional neighbours.
Kenya appreciates this and in the last budget scrapped the VAT on all mobile handsets, cellular networks, telephones or other wireless networks.
The Government, constrained for cash, is reluctant to entertain any moves towards scrapping taxes, as telecommunications companies are some of the biggest taxpayers.
One can, however, argue that the long-term benefits, which will pervade every sector of the economy, are worth the short-term pain.
A vibrant telecommunications industry would go a long way in lowering business costs and allow the country to be more competitive regionally and globally.
In addition, any improvements in the telecommunications sector will make it more easier to tap into the multi-billion dollar ICT industry.
The information and communication technology (ICT) ministry is discussing with the finance ministry to scrap off the 18% Value Added Tax on mobile phones.
The move is expected to increase access to phones by some of the poorest communities across the country. “I say so because if we do not respond accordingly, those who live near the border will just cross to Tanzania or Kenya and pick up phones from there and we lose the taxes,†said Aggrey Awori, the ICT minister. Uganda charges the highest taxes on phones and related services.
Kenya scrapped VAT on mobile phones, the move Awori wants harmonised across the region. “In the very near future, probably in the next budget, there will be no 18%,†said Awori, while commissioning the Zain and Ericsson Lake Victoria rescue project yesterday.
Phone manufacturers have urged the Government to scrap the 18% VAT on mobile phones in order to increase usage among the population. They argue that the biggest barrier to increased mobile phone use is the handset price.
According to research, a more favourable tax regime on the continent would see an additional 43 million mobile phone users. But increased telecommunications penetration has far-reaching consequences for the economy. It is estimated that every 10% increase in mobile penetration leads to a 1.2% point increase in economic growth.
An additional disincentive to mobile phone usage is the 12% excise duty on airtime. Uganda is a land-locked country with less than adequate transport and general infrastructure and as a result the cost of business is higher than its regional neighbours.
Kenya appreciates this and in the last budget scrapped the VAT on all mobile handsets, cellular networks, telephones or other wireless networks.
The Government, constrained for cash, is reluctant to entertain any moves towards scrapping taxes, as telecommunications companies are some of the biggest taxpayers.
One can, however, argue that the long-term benefits, which will pervade every sector of the economy, are worth the short-term pain.
A vibrant telecommunications industry would go a long way in lowering business costs and allow the country to be more competitive regionally and globally.
In addition, any improvements in the telecommunications sector will make it more easier to tap into the multi-billion dollar ICT industry.