Uganda: Nokia is lobbying for the removal of VAT on its products making them "more affordable", the revenue to be recovered by greater use of airtime

[the monitor] Nokia, one of the world's leading mobile phone manufacturers, will this month send representatives to Uganda, to push for the removal of Value Added Tax on mobile phones sold in the country.

Nokia will make the move in a bid to make mobile phones more affordable to more Ugandans, thereby widening the penetration level of mobile usage, according to Ms Dorothy Ooko, the communications manager corporate functions, East and Southern Africa, who will be part of the delegation.

Ms Ooko said by making the mobile handsets more affordable, the government will increase ownership thereby increasing airtime and in turn increasing excise duty for the government.

"It is a win-win situation for the consumers, operators, the government and the handset manufacturers," she said in an interview with the Daily Monitor in Nairobi on Tuesday.

Uganda's government currently levies 18 per cent Valued Added Tax and a clearance fee of Shs0.3 per cent, which instantly increases the cost of each imported mobile phones by 18.3 per cent once applied. In terms of price, it means that if the a phone costs Shs200,000 before entry into Uganda, it's value will rise to Shs236,600 as soon as the Uganda Revenue Authority applies the VAT and clearance fee charges.

According to Ms Ooko, removing VAT on mobile phones will immediately reduce the cost of mobile phones sold in Uganda by 18 per cent there by making the phones cheaper and accessible by more people. There are currently nine million phone users out of a population of 30 million people, according to the Minister of ICT Aggrey Awori. The penetration rate of mobile phones is 24 per cent, according to the Uganda Communication Commission.

In comparison, Kenya which has removed VAT, has about 18 million subscribers out of a population of 35 million people. Kenya announced the removal of a 16 per cent VAT on all mobile handsets on June 11, 2009 during the nation's 2009/10 Budget reading by Mr Uhuru Kenyatta, the nation's finance minister.

"In order to promote the communications technology sector and boost economic development of Uganda, the mobile telephones should also be zero rated as have been computers and their accessories," said Ms Ooko.

According to a 2008 report by the Global System for Mobile communication Associations (GSMA), titled: Taxation and the growth of mobile services in sub-Saharan Africa, a 10 per cent increase in mobile penetration increases Gross Domestic Product (GDP) by 1.2 per cent in many Sub-Saharan Africa.

The GSMA is an association of 800 mobile and fixed phone telecommunications services providers in the world. If the GSMA figures are to go by, a 10 per cent in crease in Uganda's penetration rate would result into $184 million.

While removing VAT is one of the catalysts for increasing the penetration of information and communication tools, experts have also argued that to make mobile communication accessible to a far greater, the cost of the services, and other taxes like exercise duty need to be addressed.


Uganda: Nokia to Lobby for Drop in Mobile Phone Vat