The Kenya Revenue Authority (KRA) is reviving a proposal to tax mobile phones when they connect to a Kenyan network. KRA Board Chairperson Ndiritu Muriithi defended the idea at a media engagement in Laikipia, citing difficulties in collecting taxes from phone imports due to under-declaration and misuse of consolidated cargo arrangements. The proposed 25% tax was included in the Finance Bill 2026 but was subsequently dropped after Parliament's Finance and National Planning Committee recommended its removal.
The existing 10% excise duty on mobile phones remains unchanged. Currently, excise duty is collected when a phone is imported or manufactured locally. The proposed activation tax would make importers and licensed manufacturers liable for the 25% duty when a device is activated on a Kenyan network. This would allow KRA to use mobile network records to identify devices and reconcile them against import declarations and tax payments.
However, the proposal raises concerns about its implementation, particularly regarding the definition of activation. The Bill did not clearly define activation, leaving questions about whether it would mean switching on a phone, inserting a SIM card, or connecting to a local network for the first time. This ambiguity is significant for imported personal devices, second-hand phones, and handsets used exclusively over Wi-Fi.
KRA's proposal aims to address the issue of under-declared phones in consolidated cargo shipments. In September, KRA investigators uncovered 55,607 basic smartphones and 309 undeclared high-end phones in a shipment, with an alleged KES 56 million in under-declared taxes. The investigation supports KRA's concerns about phone tax evasion, but it does not establish the overall scale of the problem.
The proposed activation tax would shift the liability from importers to buyers, with the cost likely being passed on to consumers. The 25% tax would start with importers but end with buyers, potentially pricing out lower-income households that rely on phones for mobile money and work. The proposal also raises concerns about privacy, as it would require device identifiers such as IMEI numbers to match phones with import and tax records.
KRA has already introduced measures to target weaknesses in consolidated cargo arrangements, including a notice requiring importers, customs agents, and consolidators to disclose individual importer details and the value of goods in their shipments. However, the authority has yet to publish the size of the revenue gap or explain why its new cargo disclosure rules, inspections, audits, and prosecutions cannot close it.
The proposed activation tax has sparked concerns about its potential impact on phone buyers and the risk of data misuse. Until KRA provides more information on the revenue gap and the effectiveness of its existing measures, the proposal remains contentious. The authority's frustration with under-declared phones is backed by real cases, but the case for moving the tax to the point of activation is thinner.
Key points
- KRA proposes 25% tax on phone activation to address under-declaration and tax evasion
- The proposed tax was dropped from the Finance Act 2026 due to concerns about its implementation and impact
- The existing 10% excise duty on mobile phones remains unchanged
