Technology and Science

Taxes hindering Internet penetration

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By David Mugabe 

The sale of internet and non-internet enabled phone devices is curtailed by excise duty and value added tax levy, a leading handset vendor said last week. 

Huawei Technologies, a Chinese firm that has so far sold 30,000 Android powered handsets that enable mobile phone users to access internet, explained that the figure would be higher even for basic handsets if there was no tax levied. 

While this has boosted internet penetration, the figure is still too small compared to Kenya where close to 200,000 handset devices have been sold through the different vendors. 

Kenya scrapped VAT on mobile handsets about two years ago. 
“The problem is brought about by VAT and import duty,” said Steven Zhang, the Huawei Technologies terminal sales director. 

Finance ministry officials in the past made it clear that tax on mobile handsets will remain to boost the narrow tax base. 

Despite the tax levy, Huawei is targeting selling over 50,000 units annually starting 2012 using a sustained marketing campaign. 

Huawei has been selling the gadgets to telecom operators who then sell and market the products to increase their voice-and-data uptake. Smart phones like the Google powered Androids are slowly changing the face of mobile internet despite the low penetration. 

The Google powered ideos in the range of handsets called the $100 phones is a versatile and user friendly device that allows the user to have a full range of office communication once synchronised including outlook, Facebook, Twitter and Google mail. 

Huawei is already developing, the UH520, a double sim device that will be co-branded with the Discovery brand. 

It is predicted that although it will be slightly expensive, it will increase penetration because of the market’s uptake of double sim cards. 

The firm is also looking at going beyond selling through operators to setting up their own distribution channels.

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