Nokia has announced that it recorded 20 per cent decline in sales in East Africa. The company also blamed the introduction of 16 per cent value added tax in September 2013 as the reason behind the loss.
The introduction of 16 percent value added tax on mobile phones in September last year has cut Nokia’s mobile phone sales by 20 per cent, the company has said. According to Nokia East Africa general manager, Bruce Howe, the government’s decision to add tax on the previously zero rated mobile market pushed up the price of phones leading to a drop in sales.
“We are working with the respective bodies to try to revert the decision on mobile device taxing because over 50 per cent of market is now on gray market,” Bruce said during the launch of new Nokia Lumia and Asha smartphones in Nairobi.
Gray market is the sale of imported goods (brought by small import companies or individuals not authorized by the manufacturer) which would otherwise be more expensive in the country they are being imported to.
He expressed concerned that the gray market is taking a significant portion of Nokia’s market by trading in cheaper phones, thus avoiding paying tax.
“The pricing of our devices has gone up 20 per cent in order to cover the 16 per cent increase in VAT, thus reducing demand,” Bruce said.
He however expressed confidence in the performance of Nokia’s new range of premium smartphones to reposition the firm back in the market and help in regaining sales and push the firm back to profitability.
“Windows phone 8 being our smartphones’ operating system of choice, the acquisition by Microsoft is now on final stages of regulatory and shareholders approvals, and we hope the buyout will help promote the Nokia brand,” he said.
