KRA defends rejected phone tax proposal as new cargo rules expose import loopholes
Kenya Revenue Authority (KRA) Board Chairperson Ndiritu Muriithi has defended the proposed KRA phone tax, arguing that large importers exploit consolidated cargo arrangements to bring high-value mobile phones into the country without paying the required taxes.
His remarks come as the authority tightens documentation requirements for individual importers using shared shipping containers, placing the taxation of smartphones back in focus following Parliament’s rejection of an earlier proposal.
Speaking during a media engagement in Laikipia on Saturday, October 31, Muriithi said some importers were hiding behind small-scale traders who use consolidated cargo services to bring goods into Kenya. He argued that arrangements originally designed to help smaller businesses share shipping costs had been exploited by larger traders importing high-value products, including mobile phones.
Using a handset he was holding during the engagement, Muriithi illustrated the potential customs revenue associated with large shipments. He said a phone could attract KSh20,000 in customs duty and that a container carrying 100,000 handsets could therefore represent KSh2 billion in potential tax revenue.
Muriithi said some importers were taking advantage of traders operating in markets such as Gikomba and along Kirinyaga Road to conceal the actual ownership and value of goods entering the country. He blamed the practice for putting legitimate businesses at a disadvantage, arguing that retailers paying the required taxes were struggling to compete with phones imported without the applicable charges.
“Those cartels came and ruined something that was developed by previous governments to protect the small traders,” he said.
New cargo rules target individual importers
Muriithi’s remarks come as KRA implements new disclosure requirements for businesses using consolidated cargo arrangements. In a public notice issued on October 27, the authority required consolidators, customs agents and importers to provide individual importer information for goods transported through shared consignments.
The required details include an importer’s name, KRA PIN, national identity card number, telephone contact, description of the goods and their declared value. KRA said the requirements were intended to improve transparency and accountability in consolidated cargo imports while supporting electronic tax invoicing through its electronic Tax Invoice Management System (eTIMS).
The system is also intended to help eligible VAT-registered importers obtain electronic tax invoices and claim input VAT. By requiring information about individual traders and their respective consignments, KRA is seeking greater visibility into the ownership and value of goods entering the country through shared shipping arrangements.
The measures address the same import-compliance concerns Muriithi raised in Laikipia, although his preferred approach involves collecting excise duty when a mobile phone connects to a telecommunications network.
The cargo disclosure requirements also affect the small traders who rely on consolidated shipments to share freight costs. These businesses use the arrangement to import goods without having to finance entire containers individually, while customs agents and consolidators handle the movement of consignments.
Smartphone shipment exposes alleged tax evasion
A smartphone shipment investigated by KRA illustrates the type of under-declaration that has featured in the authority’s enforcement efforts.
Business Daily reported that investigators uncovered a consignment containing 55,607 basic smartphones that had been declared as only 3,000 devices, alongside 309 undeclared high-end smartphones at Eldoret International Airport. The investigation reportedly resulted in an additional tax liability of KSh56 million, with KRA recommending prosecution or an administrative settlement involving the importer and clearing agent.
The case provides a concrete example of the customs compliance concerns surrounding mobile phone imports. It also places Muriithi’s criticism of consolidated cargo arrangements in the context of reported discrepancies between declared shipments and the goods being imported.
For KRA, individual importer identification and accurate cargo declarations form part of the effort to improve accountability across the import process. The requirements also bring electronic tax invoicing into the relationship between importers, clearing agents and the businesses receiving imported goods.
Parliament rejected the proposed 25% phone tax
The proposal defended by Muriithi was previously included in the Finance Bill 2026, which sought to replace several taxes and levies affecting mobile phones with a single 25% excise duty collected when a handset was activated on a telecommunications network.
Treasury had argued that consolidating the charges would simplify the tax structure while improving revenue collection. The proposed mechanism would move excise duty collection away from the point of importation and link it to a handset’s connection to a mobile network through SIM card activation.
However, the National Assembly’s Departmental Committee on Finance and National Planning rejected the proposed rate and collection mechanism, citing implementation challenges and concerns about the affordability of smartphones. The proposal was subsequently excluded from the Finance Act 2026, meaning activation did not become a new tax trigger.
The parliamentary debate also raised concerns about the implications for consumers purchasing phones through different retail channels. The proposal attracted criticism over the potential cost burden on smartphone buyers and the practical requirements for telecommunications operators to facilitate tax collection.
M-KOPA’s expansion in affordable smartphone financing provides another perspective on the importance of handset prices to Kenya’s digital economy. The company reported reaching 10 million customers across Africa in October 2026, while its Kenyan business has been involved in expanding access to smartphones through financing and distribution.
The wider mobile market also demonstrates the scale of the issue. Communications Authority figures reported by TechTrendsKE showed that Kenya had 52.26 million connected smartphones at the end of June 2026, alongside 27.42 million feature phones. Mobile devices support access to banking, education, communication and digital commerce, making their affordability a significant consideration in the taxation debate.
Ruto plans to remove the separate 25% phone import duty
Muriithi’s defence of the activation-based proposal comes days after President William Ruto announced plans to remove the separate 25% import duty on mobile phones.
Speaking during the 63rd Mashujaa Day celebrations at Kipchoge Keino Stadium in Eldoret on October 20, Ruto said he had directed the National Treasury to present proposals to Parliament to remove the duty introduced on July 1, 2026, following changes to the East African Community’s Common External Tariff.
The President said the government would pursue the necessary legal and regional customs processes to implement the change, arguing that mobile phones had become essential tools for education, business, banking and employment.
“As we all know, a mobile phone is no longer a luxury. It is a classroom, a marketplace, a bank and an office, and for many young Kenyans, a gateway to employment,” Ruto said.
The proposed removal concerns the 25% import duty under the EAC customs framework, while the activation-based excise duty defended by Muriithi was a separate proposal in the Finance Bill 2026. The two measures therefore concern different parts of Kenya’s mobile phone taxation framework.
For mobile phone importers and retailers, the distinction matters because customs compliance and the cost of bringing devices into the country affect the businesses supplying the market. KRA’s new consolidated-cargo requirements place greater emphasis on identifying individual importers and documenting their goods, while Muriithi continues to argue that stronger measures are needed to address tax evasion involving mobile phones.
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