Airtime tax hands KRA Sh19.7billion over nine months
Tuesday, April 23, 2019 10:38
By EDWIN OKOTH
Airtime tax collections hit Sh19.7 billion in the nine months to March, new data by the Kenya Revenue Authority (KRA) shows, priming the Treasury to surpass its performance targets for 2018/19.
This means that the government is just Sh1.3 billion shy of its Sh20.2 billion collection target from this segment for this fiscal year, with three months to go.
The Finance Act, 2018 increased excise tax on airtime to 15 percent from 10 percent, setting consumers for more expensive data, call and SMs services.
Telcos passed down the costs to consumers last year as mobile subscription increased to 49.5 million by the end of 2018, creating a soft target for the taxman amidst concerns of lowered collection from other sources due to drought.
In October 2018, Safaricom, #ticker:SCOM which holds the largest chunk of the mobile subscribers, announced it had increased the price of voice calls, data and SMS as it sought to pass on the increased tax to consumers.
The firm raised the cost of calls by 30 cents, and SMS by 10 cents, after the tax rose to 15 percent, in addition to the prevailing 16 percent Value Added Tax (VAT) on mobile service.
“Additionally, we have also reviewed our prices for mobile data bundles, fibre to the building and fibre to the home to effect the new 15 percent excise duty tax on internet,” the firm said in a statement at the time.
Zuku and Jamii Telecommunications (JTL) had also implemented a price increase on their data and call products in a move that pushed up monthly subscriptions up by between Sh500 to Sh700.
Mr Rotich told the National Assembly’s Finance and National Planning committee last year that the airtime and internet bundle taxes were specifically intended to raise Sh20.2 billion of this year’s Sh2.97 trillion Budget.
In March alone, the excise tax raised Sh4.6 billion, more than thrice the Sh1.5 billion earned from the duty in October when most telcos loaded the increased tax onto consumers’ bills.
The Finance Act, which had attempted to backdate the taxes to July 2018 was vehemently opposed in court with the High Court ruling that the law could not be implemented before it went through the legislative process as laid out in the Constitution, including assent by the President.
Had Treasury surmounted the confusion over the effective date that saw the increase effected in October, the tax could have been much higher.
Banks — which were first to implement the higher excise duty on the fees they earn on transactions and other services — raised Sh15.9 billion over the same period, although telcos through their mobile money transactions made a significant portion of the revenues.
Banks earned an aggregate of Sh70.6 billion in fees and commissions last year.
They were projected to raise at least Sh7 billion from the tax as consumers paid more for ATM cash withdrawals, money transfer and loan processing fees among other charges.
Other excise tax heads including beer, wine, perfumes, cigarettes, soft drinks and beauty products raised Sh44.8 billion over the nine months, bringing the taxman’s total domestic excise duty to Sh80.5 billion.
Treasury last year introduced changes to the law where excise duty will now be reviewed annually with the rate pegged on inflation for the past year.
Inflation has averaged 4.8 percent in the last nine months, down for the 12 months average of 5.3 percent between July 2017 and July 2018.