Massive Smartphone Shortage Looms In Kenya As KRA Reigns

A massive shortage of new smartphones is looming in Kenya following a crackdown by the Kenya Revenue Authority (KRA) through the new cargo consolidation policy that has seen KRA net eight times the products and taxes more than before the policy.

Most importers of new smartphones, mostly small-scale traders, have either abandoned their cargo at the Port of Mombasa or have canceled the importation. Most claim that the taxes being asked by the Kenya Revenue Authority at the Port are ridiculous.

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In June, the taxman kicked off a 100 percent check of imports to enable payment of tax based on the transaction value of the cargo as opposed to the rate of 200 shillings per kilogram. This means that KRA looks at every item and deducts taxes on each.

The move by the Kenya Revenue Authority has taken a heavy toll on thousands of small-scale traders of consumer goods such as Mitumba, mobile phones, electronics, and other household goods as they are now having to pay more to clear their cargo. Mitumba traders have threatened to hold a demonstration if the current situation will continue.

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Importers of smartphones are the most hit. Currently, KRA is no longer charging 200 shillings per kilogram but per transaction value of the gadgets. This means that traders are paying much higher taxes at the port than before rendering thousands of them helpless.

According to KRA, there are some items that could fetch 80,000 shillings before the policy, but after the policy, they were found to fetch at least 700,000 in taxes. The government hopes to use this to raise more revenue from imports than before.

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The move is likely to see skyrocketing smartphone prices in Kenya. Affordable phones are also likely to increase in price. Sellers say that a smartphone that was initially 8,000 shillings is now going for 13,000 shillings, scaring away most buyers.

Importers say they will have to pass the costs to the consumers, a move that will lead to reduced sales in Kenya. It is also likely to lead to a reduction in smartphone imports. Many phone manufacturers are also contemplating other markets in East Africa to avoid Kenya.

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While taxation is essential for a well-functioning society, the burdensome and often arbitrary tax policies in Kenya have become a chokehold, suffocating businesses and stifling their potential.

It’s high time we recognize the detrimental impact of unfair taxation on businesses and startups, as they are the lifeblood of our economy.

Kenya’s tax regime often fails to consider the delicate balance between generating revenue for the government and ensuring the sustainability and growth of businesses. The tax burden imposed on businesses, especially startups, is disproportionately high, placing an undue strain on their limited resources.

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This leaves little room for reinvestment, expansion, and innovation, hampering their ability to compete effectively in the market. Instead of nurturing these enterprises, unfair taxation cripples their growth potential, creating a hostile environment for startups to thrive.

In Kenya, businesses are confronted with a labyrinth of complicated tax regulations, which often change without warning or clear justification. This lack of stability and predictability breeds uncertainty, making it difficult for businesses to plan their operations effectively.

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