Handset maker Nokia says a tax imposed on Kenyan mobile phones has resulted in grey market sales of these devices increasing by almost three-fold.

The introduction of Kenya’s value added tax (VAT) act in 2013 resulted in handset prices increasing by 16%.

The act was instituted because goods such as mobile phones and computer hardware were previously exempted from tax in Kenya.

But head of communications for Nokia South East Africa, Leo McKay, has told ITWeb Africa that the introduction of VAT on handsets is resulting in Kenyans turning to unofficial channels to buy these devices.

“0verall the market reflects that in Kenya, the grey market has grown from 20% (of the overall market) before the reintroduction of VAT, it sits at around 60% currently,” McKay told ITWeb Africa.

East Africa analyst for Informa Telecoms & Media, Danson Njue, told ITWeb Africa that his research firm does not have statistics to back up Nokia’s claim of the extent of the problem.

But Njue does agree that VAT on mobile phones is hampering official sales of these products.

“It is true: the introduction of VAT has definitely promoted the grey market for mobile devices,” Njue told ITWeb Africa.

“In fact, there are fears that it might reverse the gains realised in eradicating fake mobile handsets in the market.

“I think it is a good idea for all stakeholders to continue engaging with the government on the matter. Obviously, the ICT sector, and in particular the mobile telecoms sector has and will continue to be key in supporting the government’s plans to eradicate poverty and grow the economy,” Njue added.

Risks accompany buying grey market goods because the likes of official warranties are not guaranteed.

Nevertheless, McKay told ITWeb Africa that Nokia “continues to engage with major stakeholders in both government and the industry” on the matter in Kenya.

The East African country has 31.3 million mobile phone connections, according to statistics from the Communications Commission of Kenya (CCK). Kenya has a population of 43 million, say World Bank figures.