The Kenya Revenue Authority (KRA) has introduced a 10 percent excise duty on wireless telephone services, which local loop operators have criticized as unfair.

"What we have is a landline service offered on wireless technology, yet our competitors offer fixed-line solutions on copper but are not being asked to pay duty," said Flashcom CEO Joe Kimani.

The new duty covers CDMA (Code Division Multiple Access) for voice data and multimedia services, which is expected to increase the cost of delivery to consumers.

Telkom Kenya offers both fixed-line (copper) and wireless (CDMA), but copper lines are exempt from duty, which has raised issues of unfair taxation.

In an advertisement in the local press, the KRA warned that anyone offering CDMA service is required to register, pay the new tax and pass the cost on to consumers.

The advertisement suggests that the tax emanates from the 2008/2009 budget, reading, "With effect from June 13, 2008, any person providing wireless telephony services is expected to register with the commissioner and charge excise duty appropriately."

During budget planning this year, local loop operators had hoped that the finance minister would cut investment deductions, which fall under the Income Tax Act, to investors in the sector.

The IDG News Service is a Network World affiliate.