The National Assembly Finance & Planning Committee has been told that the argument by the National Treasury that Finance Bill 2026 will make phones cheaper by consolidating taxes on mobile phones is incorrect.
In case you are lost, here's what Finance Bill 2026 proposes:
· Delete paragraph 29, of the 2nd Schedule to the VAT Act, 2013 which currently provides VAT
zero rate on the supply of locally assembled & manufactured mobile phones
· The Bill proposes to classify as exempt the supply of imported or locally purchased telephones for cellular networks & other wireless networks
· Impose 25.0% excise rate on locally assembled phones (currently 0%) & increase the rate on
imports from 10.0% to 25.0%
· Also, the Bill shifts the excise duty trigger to the point of phone activation
· The Bill proposes to exempt imported finished phones from IDF and RDL
Sun King's core argument is that Finance Bill 2026 means that locally assembled phones will lose 3 protections they currently enjoy simultaneously:
· Input VAT recovery since they are being reclassified from Zero-rated to Exempt status
· Prior excise exemption
· While Finance Bill 2026 exempts imported finished phones from IDF and RDL, it provides no equivalent relief for imported components used in local assembly of phones
Sun King argues that the net effect of Finance Bill 2026 proposals is that:
· There will be ~11.0% retail price increase required to make the current operations for imported finished phones viable under a Finance Bill 2026 tax regime
· There will be a ~34.0% retail price increase required to make the current operations for locally assembled phones viable under a Finance Bill 2026 tax regime
Sun King argues that its Tatu City facility (Kes 25.0 million invested, 50 direct jobs, 80,000 phones produced to date) would face closure under a Finance Bill 2026 arrangement as currently proposed.