Kenya: Smartphone Shortage in Kenya as KRA Intensifies Tax Regulations

Kenyan smartphone vendors are facing challenges as taxation measures and supply shortages impact prices and availability of devices in the market. The Kenya Revenue Authority (KRA) has implemented measures to curb tax evasion, resulting in slower business operations and higher consumer prices.

Over the last few weeks, Kenya has experienced a shortage of smartphones, causing concern among both official and non-official vendors. Some businesses have been forced to close or reduce their operations due to the scarcity of devices. Retailers who still have smartphones in stock have raised prices, making it difficult for budget-conscious Kenyans, who prefer entry-level smartphones, to afford them.

One of the taxation measures introduced by KRA requires importers of consolidated cargo to pay taxes based on the transaction value, departing from the previous fixed duty of KES 200 per kilogram. This new approach aims to address tax evasion and ease costs for small importers. Some importers have been falsely declaring high-end mobile devices as feature phones to pay lower taxes, contributing to the revenue loss.

The rise in smartphone prices can also be attributed to currency exchange rate fluctuations, increasing import costs, and supply chain disruptions. The limited availability of smartphones is compounded by delayed customs clearance due to multiple procedures introduced by KRA, leading to longer waiting times at warehouses.

Security concerns from political protests have further impacted vendors’ decisions to limit their stock, fearing looting and property damage. As a result, some vendors are cautious about maintaining large inventories.

KRA is targeting vendors who have evaded taxes and has instructed them to collect their products after verification. The implementation of taxation measures may lead to slower business growth for non-compliant vendors, potentially reducing the number of players in the industry. Consequently, consumers may have to pay higher prices for smartphones that were previously more affordable.