Uganda Telecos call for review of Taxes on smartphones after official launch of the Galaxy S4

After our semi harsh review of the the Samsung Galaxy S4 yesterday, its now time to see how to get it in your hands. But early adopters of this slim, complex, slick and also high end smartphone in Uganda have to part with a hefty amount of dimes all thanks to the 18% Value Added Tax levied by the government on all products. A customer in Uganda will  have to fork out between UGX 1.89m ($ 734) to UGX 2.2m ($ 852) for this dazzling device. The prices of mobile telephone handsets in Uganda remains high compared to those in neighboring Kenya, partly, thanks to VAT.

“If we do not have VAT on laptops, why do we have it on smartphones? ” said V.G.Somasekhar, CEO Airtel Uganda at the launch of the Galaxy 4  smartphone. ” The Government should review the VAT  tax to make handsets affordable.We need to make it affordable for customers to purchase these handsets,” he said while at the official launch of the Samsung Galaxy S4 smartphone in Uganda on May 8, 2013. In 2007, government introduced a zero tax policy on the importation of computers and laptops in Uganda.

At the same event, Robert Ngeru the Chief Operating Officer, Samsung Electronics East Africa said, “all we can do is simply request the government to review the tax policy on smartphones.” He further revealed that Samsung smartphone sales in Uganda are “not that good” compared to Kenya and Tanzania. A new Samsung Galaxy S4 in Uganda will cost Ushs2.2m   ($ 852) or Kshs73, 000 ($ 870) but in Kenya, it costs between Kshs53, 000 ($ 632) and Kshs64, 999 ($ 775).

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The VAT factor in the cost for Uganda is about Ushs 396, 000 ($ 154).However, there are also other factors that keep the cost higher, among them include  Uganda being landlocked. At the launch of the Galaxy 4, Hon. Nyombi Thembo, Uganda’s State Minister for ICT said, “we are aware of the physical barriers and doing what we can to deal with them.” He went on to say that there is need to balance the budget considering macro economic conditions in the country.

“government might have some good news for you soon”

The ICT minister however went on further to assurance that in the next few months “government might have some good news for you.” Telecom players, already decrying VAT on Airtime, predict an increment in the transaction costs for consumers. The telecoms are also a target for an International Calls Levy which the government could raise Ushs40bn  ($15.5m). These among other new tax proposals are expected to bring in Ushs383.47bn ($ 148.4m) .

Despite the overriding taxation challenges, Uganda still remains a market that Samsung Electronics continues to tap into considering the positive economic growth projections, now at about 6 percent for 2013/14. Airtel is currently the first telecom in Uganda to partner with Samsung to sell the Galaxy S4. Orange and others to follow with LTE versions of the Galaxy S4.

Source: CEO Mag