Kenya’s mobile phone market faces uncertainty as taxes, prices surge
The Kenyan mobile phone market is staring at a huge challenge as reports of stock shortages at phone shops continue to emerge.
Many shop owners are attributing this situation to recent changes made by the Kenya Revenue Authority (KRA) in the treatment of imports, particularly concerning smartphones and other excisable goods.
This has led to confusion and disruptions in the supply chain, leaving shop owners struggling to restock their shelves. Since the beginning of the month, phone shops have seen a sharp decline in sales, leaving them with minimal revenue to cover essential expenses such as rent and employee salaries.
The situation has been exacerbated by the fact that existing stocks of smartphones are held up at the airport due to uncertainties surrounding their taxation and clearance.
The root cause of the stock outs and delays lies in the recent changes made by the KRA regarding the classification of smart phones for taxation purposes. Prior to June 1, smartphones were treated under the per kg consideration, similar to feature phones.
However, after the specified date, smartphones, along with other excisable goods, were transitioned to the per unit value consideration.
“This month many phone shops will pay rents and salaries having sold almost nothing during the month as stocks are held at the airport,” said one James Morien, a trader in Nairobi.
The KRA’s decision to make this shift was driven by the detection of concealment practices where some importers were allegedly declaring smartphones as feature phones to take advantage of the lower tax rates.
By transitioning to per unit value consideration, the KRA aims to ensure a more accurate and transparent assessment of taxes on smartphones and curb potential tax evasion. However, the immediate consequence of this change has been a surge in tax liabilities for some importers.
Phone shop owners and retailers, who depend on a steady supply of affordable smart phones, are now grappling with higher costs, and some are finding it challenging to acquire new stocks.
