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The cost of using the internet and making phone calls in Kenya is expected to go up after the National Treasury proposed an increase in excise duty.
The proposal suggests raising the excise duty rate from 15% to 20% as part of efforts to boost government revenue. If approved by Parliament, this change will affect the prices that consumers pay for internet bundles and airtime, impacting both households and businesses.
The Treasury believes that raising the tax on telephone calls and internet services will help in bridging the gap in the national budget.
With rising government expenses and economic challenges, this move is part of a broader effort to increase revenue.
According to the proposal, a higher excise duty will contribute to meeting financial demands in various sectors like healthcare, education, and infrastructure.
Pros of Higher Internet and Calls Costs
The main advantage of the higher tax rate is that it provides additional funds to the government, which can be used for public projects, social services, and economic development initiatives. If well managed, this revenue can improve the quality of services in sectors such as healthcare and education.
Higher costs may encourage the development of local internet-based services that are more affordable and accessible. Companies might seek ways to create low-cost solutions to compete and serve consumers who may be unable to afford mainstream, more expensive options.
Some believe that increased costs might lead to more mindful usage of internet and phone services. This may particularly apply to unnecessary data usage or excessive calls, which may benefit consumers financially if they manage their usage carefully.
Cons of Higher Internet and Telephone Costs
Many low-income households rely on affordable internet and telephone services to stay connected and access information. Higher rates could limit their access, widening the digital divide between higher- and lower-income households. For many, the internet is essential for education, job opportunities, and even accessing government services.
SMEs rely heavily on affordable internet and telecommunications for marketing, customer service, and operations. Higher costs may limit their ability to reach customers, especially for those who rely on online platforms to reach wider markets. Increased expenses could force them to scale back operations, affecting overall economic growth and employment.
Kenya has made significant progress in digital adoption, with increasing numbers of people gaining internet access in recent years. Raising the cost of data and calls could slow down this progress, as fewer people might afford regular internet access. This would be a setback to the goal of making Kenya a technology hub in Africa.
The internet has become a major source of information, whether for educational resources, news, or government services. Higher costs could limit access to this information, affecting students, job seekers, and other groups who rely on affordable internet for their daily needs.
The proposal has raised concerns among consumers, telecommunications companies, and business groups.
Many are concerned that the additional costs will strain household budgets, especially as the cost of living continues to rise. Industry stakeholders worry that this might discourage people from using data services frequently, which could impact the profits of telecom companies and, in turn, reduce the tax revenue the government collects from the sector in the long term.
The proposed increase in excise duty on internet and telephone services will require parliamentary approval before it can take effect. If implemented, this change will likely have a broad impact on individuals, businesses, and the overall digital landscape in Kenya. The government will need to carefully weigh the potential revenue gains against the possible economic challenges faced by Kenyan households and businesses in an increasingly connected world.
