Taxation fuels the digital divide

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Between Kenya and Somalia, which one has more affordable mobile Internet?

Most people would be surprised to learn that it is Somalia.

A study carried out in the first quarter of 2020 found that the price of 1GB of mobile data in Somalia is $ 0.50, way much cheaper than most African countries, and among the cheapest rates for mobile data in the world. The cost in Kenya is $ 1.05.

Why would the mobile Internet be very cheap in Somalia?

Less tax, cheaper Internet connectivity

One of the reasons that Somalia has very cheap Internet is because of limited taxation. Once the cable lands at the coast, mobile network providers are liberty to do almost whatever they want inland with the little hindrance of taxes.

In contrast, Kenyans pay is heavily taxed when it comes to the use of mobile networks and it is reported that the mobile sector’s tax contributes is 2.2 times its size in the economy.

There are other factors that affect the cost, like landlocked countries and islands paying more for mobile internet. However, Somalia’s case relative to Kenya is largely a matter of tax. This is something that would be expected, but sometimes the taxes can be more than reasonable.

Governments fueling digital divide with taxation

This is not the only industry that is a cash cow for the government when it comes to tax. Petroleum products in Kenya are heavily taxed. A liter of petrol is currently retailing at KShs 100.38 in Nairobi. Out of that, KShs 53.56 goes to various taxes and levies.

In essence, it is like Kenyans are buying taxes and getting some fuel on top of it.

While taxes are unavoidable and necessary for the government to exist and offer many other services, high taxes are not a solution especially when the cost is one of the major barriers to Internet access. It is likely that the current digital divide will continue for longer fueled by the high cost of internet access.

Unfortunately, the government is likely to result in more taxes if the need arises, and the mobile sector is one of the low hanging fruits where additional taxes can be levied. At the same time, it is well known that a big proportion of Kenya’s national budget is lost to corruption and consequently, the taxes that we milk from every sector may not be necessary if we dealt with corruption.