Could tax plans undermine Kenya's low-cost smartphone initiative?

Could tax plans undermine Kenya's low-cost smartphone initiative?

Leading Kenyan operator Safaricom is reportedly unsure that Kenyan plans to assemble a $40 smartphone in-country can work. The issue, it argues, is taxes.

As we reported earlier this month, Kenya will soon unveil the result of a local smartphone assembly initiative, whose aim is to extend digital inclusion by bringing down device costs. Most smartphones are not affordable to lower income users; a US$40 model could be. The first phones are expected in under two months.

However, Safaricom says the US$40 target isn’t reachable, given that  the present government is lobbying to increase excise duty, VAT and import duty in a new bill. These taxes, it suggests, would more than double the suggested selling price.

As local news resource techcabal points out, the smartphones will be part of wider government plans to enhance connectivity, notably through the creation of 25,000 public Wi-Fi hotspots and Digital Village Smart Hubs in all 1,450 wards across Kenya. Improvements to e-government services are also planned. However, they would be most effective if there were cheap devices able to access them.

Hence the local assembly plan and a facility that, Safaricom says, can produce up to 1.4 million devices in one year, bringing cost savings to both end users and operators, who are, at present, importing millions of devices a year.

Except that taxes may endanger this plan. Thus, Safaricom has suggested that the Kenyan Committee on Finance and National Planning needs to tackle import, excise, and VAT concerns to make cheap phones attainable. It’s not yet clear how the government will respond.

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