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Tax waive on airtime will boost ICT growth

By | July 8th 2009

By James Ratemo

With mobile communication popularity on the rise, all eyes are on Finance Minister Uhuru Kenyatta to see if he will reduce or waive taxes on airtime and mobile phones.

Stakeholders say high cost of communication prohibits growth in the telecommunications sector, especially in rural areas.

Yu Marketing Director Anna Othoro said mobile phone companies pay 10 per cent excise duty and 16 per cent VAT on air time.

The custom duty on mobile phones and accessories has also seen prices of handsets remain high and out of reach for some Kenyans.

Nokia Communications Manager, Eastern and Southern Africa, Dorothy Ooko said the same logic used to zero rate taxes on computers two years ago should apply to mobile phones since most people access the Internet via phones.

Internet experience

"Top on my wish list is removal of VAT and license fee on all mobile phones in East Africa. Stakeholders especially ordinary Kenyans will find mobile phones affordable and this will empower them in carrying out their activities," she said.

She said for many people in Africa, their first Internet experience will be with a mobile device as laptops and PCs are too costly or impractical.

"The Internet penetration in Kenya is about 33.6 per cent. We believe that through mobile phones, this penetration can be increased as entrenched in Vision 2030," she argued.

The high cost of mobile phones is also partly to blame for the increased shipping of counterfeits cell phones to the country.

The Ministry of Information requested Treasury for a stimulus plan for the ICT sector to help stock computers in rural digital villages ahead of the fibre optic cable.

PS Ministry of information Bitange Ndemo said inadequate funding for computers in schools and digital villages would delay technology take up once the undersea cable lands.

"We have also requested treasury to extend the rebate to schools so that we can have enough computers to ensure maximum utilisation of the fibre optic. We are waiting for the budget to see if our request will be accepted," he said.

The much-awaited fibre optic cable would land in Mombasa this week.

Kenya has for long been relying on World Bank funding to roll out digital villages. Although the World Bank has okayed release of the Sh800 million ($10million) for Digital Villages, Dr Ndemo said recently, there are hitches on the utilisation of the money due to the Bank’s usual bureaucracy and stringent requirements.

Expressed hope

The money was part of the Sh9.1 billion given through the World Bank’s Kenya Transparency and Communication Infrastructure Programme .

Kenya ICT Board Deputy Managing Director Victor Kyalo expressed hope that the Finance Minister would pump in more money for completion of a digital data centre and the ongoing laying of terrestrial fibre cable.

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