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A reduction in the current Mobile Termination Rates (MTRs) and Fixed Termination Rates (FTRs), from Kshs. 0.58 to the proposed new rate of Kshs. 0.12, will impact on VAT, Excise and Corporation Tax remittances.
This is according to theΒ Kenya Revenue Authority (KRA) Commissioner for Domestic Taxes, Ms. Rispah Simiyu. Ms. Simiyu said thisΒ when she appeared before the Committee on Communication Information and Innovation chairedΒ by Hon. John Kiarie (Dagoretti South), during the ongoing review of Mobile Termination Rates by the Communication Authority.
Β "Safaricom's market share is 65.6 percent and based on the approximate Call Termination Revenue per year of Kshs. 5.1 billion, the expected revenue loss by Safaricom,Β if this is effected, will be Kshs. 4.04 billion. In this regard, KRA will be losing Kshs. 647 million in VAT, Kshs. 606 million in Excise Duty, and Kshs. 1.2 billion in Corporation Tax; totaling to Kshs. 2.45 billion yearly.β Noted Ms. Simiyu.
Β Ms. Simiyu however noted that since Telkom and Airtel pay Safaricom for mobile termination, this move will give them greater price flexibility hence offering effective competition and boosting their revenue given the reduction in costs.
The Government on the other hand, which has a 35 percent shareholding in Safaricom, will suffer a reduction in revenues as a result of this reduction in termination rates, leading to a reduction in dividend payout to the Government.Β
The Acting Director-General of the Competition Authority of Kenya, Mr. Adano Roba, who also appeared before the Committee supported the move to lower the termination rates, noting that it will reduce barriers to enter the market; which will prevent abuse of dominance, narrow differences between on-net and off-net prices, increase customer choice, reduce cost of doing business, increase voice traffic and operator revenue, thus increasing Government tax revenues.
βThis will ultimately generate efficiency in the telecommunications sector for the benefit of Kenyan consumers,β said Mr. Roba.
He further cited a study conducted by the Communications Authority (CA), which expounded on the need to implement low termination rates as has been the trend worldwide in the sector, with some jurisdictions like Canada and India implementing zero rates, and also the need for symmetric termination rates between large and small operators.
