Govt increases Airtime and Internet Taxes in new proposal

This is expected to increase the cost of making calls and browsing

President Uhuru Kenyatta using a mobile phone

The National Assembly Finance Committee has introduced a raft of taxes in the Finance Bill 2021 in a delicate balance between raising money for government operations and rescuing Kenyans from the heavy burden of taxation.

In the bill which was tabled in the National Assembly on Tuesday, June 23, MP’s have proposed to increase excise duty on airtime and internet usage.

This is expected to increase the cost of making calls and browsing in the country, with millions of Kenyans already spending huge amounts on the services.

In 2018, Kenya Revenue Authority (KRA) collected excise taxes valued at Sh26.3 billion from airtime, which marked a significant growth of 63 per cent from Sh16.1 billion the previous year.

According to the latest technology penetration statistics, Kenya has about 21 million internet users and 59 million registered sim cards.

This means more Kenyans have joined the population that will be affected since 2018, signalling a huge windfall for KRA if the new tax is approved.

In 2020, Kenya National Bureau of Statistics (KNBS) declared airtime as the single item that takes up the biggest chunk of individuals’ income.

This was based on a consumer price index study which gave airtime a weight of 5.496, making it the largest of any single consumer product.

If approved by the house, the new tax is expected to earn the government quite a huge amount in revenue.

In past rare occasions, telecommunication companies have moved to absorb new taxes in airtime instead of passing the cost to the consumers.

The MPs have also rejected the new taxes introduced on motorcycles by Treasury CS Ukur Yatani in the Sh3.6 trillion 2021/22 budget.

The price of motorcycles was expected to rise Yatani increased excise duty by 15 per cent from the current Sh11,608.23 per unit.

“This Finance Bill is done at a very delicate time when Treasury and members of this House have to balance between cushioning Kenyans from the Covid-19 pandemic but the same time raising sufficient revenue to fund the Sh3.6 trillion Budget,” National Assembly Finance Committee Chair Gladys Wanga said.

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