Kenya mobile phone manufacturers are of the opinion that the proposed 16 percent VAT Bill on all handsets will skyrocket the cost of mobile phones.

Phone manufacturers including Huawei, Intel, Microsoft, Nokia, Samsung and iHUB argued that instead of focusing on generating revenue from taxing productivity, the best source of government revenue would come from a highly skilled and productive workforce.

It said the proposed amendment to the Value Added Tax Bill runs the risk of crippling the economic momentum especially the digital economy which is driven by young Kenyans.

A joint statement signed by the manufacturers indicatated: “Kenyan developers are recognised among some of the most innovative thinkers, tackling some of Africa’s biggest challenges through technology …. We should empower and support these young people, not undermine their creativity with a tax.”

“As a general rule, increasing mobile penetration by 10 percent yields an estimated 1.2 per cent growth in GDP across the economy.”

Kenya’s National Assembly Committee on Finance, Planning and Trade is considering imposing a 16 percent VAT on mobile phones. The VAT Bill has been passed before the MPs went for recess and President Uhuru Kenyatta has until August 19 to assent or decline the Bill.

In 2009, Kenyan government exempted mobile operators from paying VAT.

This, the operators said, have increased subscriber penetration and drove down the cost of ownership so that more Kenyans could benefit from mobile technology.

“Since the exemption, Kenya has experienced a 25 percent increase in mobile penetration and the correlation between growing mobile subscribers and economic growth is well established by the World Bank, McKinsey, GSMA and others,” argued the manufacturers.