Accra, Ghana, August 5, 2019//-Ghana’s enthusiastic efforts at building a digital economy could be thwarted following its recent increment of Communication Service Tax (CST).
The CST popularly known as talk tax was increased to nine percent from six percent to the surprise of mobile network operators (MNOs), and fibre broadband providers in the West African country.
Announcing the government’s decision in the Mid-year Budget Review and Supplementary Estates, the Minister of Finance, Ken Ofori-Atta said: “Government proposes to increase the tax to nine percent to develop the foundation for the creation of a viable technology ecosystem in the country”.
This he explained would comprise amongst others putting in systems to identify and combat cybercrime, protect users of information technology and combat money laundering and other financial crimes.
“The increase will not be earmarked, however, the sharing ratio will be adjusted in such a manner that the national youth employment programmes continue to receive the same proportions as they are currently receiving”, Mr Ofori-Atta told lawmakers on Monday 29, July 2019.
The CST was introduced in 2008 at an ad valorem rate of six percent. The tax is levied on charges payable by consumers for the use of communication services including voice calls, SMS, and data.
With the new increment, the legal understanding is that the government expects users (consumers) of communication services to pay more. As to how the increment is implemented will be determined by the MNOs and fibre broadband providers in the country.
For instance, in 2018, the four telecom operators namely-MTN, Vodafone, AirtelTigo, and Glo collected a whopping amount of GHS420 million to the Ghanaian government. In that same year, MTN Ghana alone collected GHS204 million, while the three others generated the rest.
Similarly, the government received GHS328 million from these telcos in 2017 with MTN Ghana once again topping the contribution.
What the industry players are saying
The Chief Executive of the Ghana Chamber of Telecommunications, Ken Ashigbey reacting immediately after the announcement noted the elasticity of demand for telecommunication service is not inelastic.
He noted that Ghanaians are already complaining about the high incidence of taxes, so the current increase could result in decreased demand thereby affecting the projections for the CST.
EFFECTS
Consumers
The Chief Executive Officer for the Consumer Protection Agency, Kofi Kapito told Citi FM, an Accra-based radio station: “It is a sad day for consumers in Ghana, especially consumers of telecommunications and consumers that are impacted with the new levy. We are talking about expanding the digital age, so it should be affordable rather than being expensive.”
“Last year, it came out that in terms of data, Ghana stands out as one of the most expensive data countries in the world so how are we going to catch up with the rest of the world?.
The Ranking Member for Finance Committee of Parliament, Cassiel Ato Forson who was livid about the recent imposition of new taxes lamented: “If these increases create frustration and Ghanaians wish to vent through phone calls or on social media, the Mid-year budget has made that expensive as well following the imposition of a 50% increase in the Communication Service Tax from 6% to 9%”.
“These measures will send shock waves through many households and businesses as this will only further compound the excruciating hardships Ghanaians are already going through. These taxes will add on to a raft of taxes imposed by President Akufo-Addo despite his promise not to do so in opposition”.
Could limit digital inclusion and economic growth
Studies have shown that mobile-specific taxes such as the CST lead to inefficiently low consumption and investment in the mobile sector in Ghana. The monies that telcos could have used for network investments would be diverted to honour tax obligations.
GSMA report titled ‘Digital Inclusion and Mobile Sector Taxation in Ghana’ asserted: “Mobile-specific taxes in Ghana fail to account for positive network effects and spillovers onto sectors such as agriculture, healthcare and education”.
Taxes such as the CST on interconnection fees have created uncertainty about their application and enforcement, it added.
The CST fails to account for positive externalities created by the mobile sector and increases barriers to affordability. This excludes many Ghanaians from the benefits of mobile and broadband services and reduces productivity and economic growth. This also risks damaging the government’s long-run tax revenues.
Increase the cost of mobile ownership
World Bank data suggests that over 12% of the Ghanaians are internet users, a figure lower than in many other African countries: in Kenya 39% of the population are internet users, in Nigeria 38% and in Senegal 20%9.
With the number of 3G connections growing rapidly since its introduction in Ghana in 2007, increased mobile ownership has the ability to bridge this gap and increase access to the internet across the population. But this could be thwarted by the latest action.
The recent increment of CST on mobile services such as calls, SMS and data will automatically increase the total cost of mobile ownership in the country which is yearning to become the digital economy hub of West Africa.
Also, it may deter Ghanaians from purchasing mobile devices thereby widening the digital divide gap. As stated earlier, majorities of Ghanaians would find it difficult to remain connected due to the recent hikes in CST.
Although increasing internet penetration is a priority of the government, and mobile broadband is the most cost-effective way of achieving this aim. But this unpopular decision taken by the government to increase the CST would make broadband expensive for majority of individuals as well as small and medium enterprises (SMEs) which employ more than half of the country’s labour force.
Silencing the masses
Culture of silence is not only about shutting opposition media down or beating journalists whose works are detrimental to your course as government. It’s also about making talking expensive such that your citizens would prefer to remain silent because they cannot afford the cost of talking, according to political communicators.
SDGs may be affected
As the Co-Chair of the SDG Advocates and President of Ghana, Nana Addo Dankwa Akufo-Addo, the government could have factored in the United Nations’ Sustainable Development Goals (SDGs) before increasing the CST.
The 17 SDGs have some relationships with the mobile industry. So, by increasing the talk tax, it may hinder the SDGs, Albert Nana Opoku, SGDs advocate stated.
Globally, as the connectivity gap closes, mobile internet adoption will increasingly become the key metric by which to measure the reach and value created by the mobile industry, including its contribution to the SDGs.
Three years into the 2030 Agenda for Sustainable Development, the mobile industry is increasing its impact across all 17 SDGs as a result of wider mobile reach and better networks, according to the GSMA’s 2019 Mobile Economy report.
“There is also growing adoption of mobile-based tools and solutions that aim to spur the digitisation of systems, processes and stakeholder interactions across a number of industries, notably agriculture, education and healthcare in low- and middle-income countries”.
For 16 of the 17 SDGs, the industry is achieving less than half its full potential impact, and the increase in impact has slowed for most SDGs.
With just 12 years left until the 2030 deadline, concerted action and an acceleration of efforts is necessary from all stakeholders – governments, the mobile industry and other sectors. But in Ghana, the government is rather piling more taxes on the CST as well as mobile industry players.
By Masahudu Ankiilu Kunateh, African Eye Report
