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East Africa: Kenya Calls On Region to Scrap Tax On Computers
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Business Daily (Nairobi)
24 April 2008
Posted to the web 24 April 2008
Okuttah Mark
Kenya wants a 10 per cent import tax on computer accessories removed, breaking ranks with its four East African Community partners in its quest to become the ICT hub for the region.
Information minister Samuel Poghisio says the ministry has written to the East African Legislative Assembly to remove the tax on computer parts. The country was keen on growing the nascent computer assembly segment to realise is potential but was finding taxes on accessories an obstacle.
Permanent secretary Bitange Ndemo said the removal of the tax could significantly improve Kenya's productive capacity - GDP.
In Kenya, the duty on computers is zero-rated but their components are still levied a fee under the EAC customs external tariffs.
The government is expected to give tax incentives aimed at reducing the cost of communication and boosting ICT investments in rural areas. The industry has been lobbying for removal of tax charged on airtime but the government has claimed tied hands under the EAC Customs Management Act.
Mobile phone airtime in Kenya is charged excise duty at 10 per cent and value added tax at 16 per cent, compounding to an effective tax of 27.6 per cent.
Also seen as stifling ICT growth are duty and taxes on film accessories and ICT hardware. Duty on telecommunication sets ranges between 10 and 15 per cent.
A Study done in 2004 by Manchester Trade Ltd on the implications for Kenya accession to the WTO information Technology agreements indicated majority of Kenyan companies preferred all computer products and accessories to be zero-rated to kickstart the penetration of ICT products.
It said removal of duties would also benefit electronic commerce, banking and health sectors.
The tax currently being charged on computer parts has made some international companies that had plans of setting up computer assembly plants in Kenya to shy away. The companies include HP and Mecer.
Other than the duty charged on computer parts, the telecoms devices face relatively large import duties of between 15 per cent and 25 per cent.
while duty on telephone handsets within the region is still at 10 per cent.
Nokia, General Manager East Africa Gerard Brandjes says the government needs to remove the duty and VAT charged on the mobile phones in order to raise penetration.
Mr Brandjes says the duties charged on mobile phones are still a major barrier in a country where majority of the population cannot afford and access lap tops and desktop computers making mobile phones a viable alternative.
A study by the London School of economics shows that an increase of 10 mobile phones per 100 people leads to an economic growth of 0.6 per cent.
In Africa, Ghana has abolished import duty and import VAT on all mobile phones imported into the country and instead proposed to impose a specific duty per minute of airtime use.
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