Ghana’s mobile telecom operators have expressed grave concern over the government’s multiple tax regime saying it is stifling the growth of the telecom industry in the country.
According to the Head of Communications and Research at the Ghana Chamber of Telecommunications, Derek Laryea, the current system of taxation on the sector risks being counterproductive to digital inclusion, economic growth and long-run fiscal stability.
The system “risks increasing barriers to affordability, reducing investment and undermining the competitiveness of the Ghanaian economy”, he told African Eye News in an interview.
The multiple taxes being paid by telecom operators; namely MTN, Vodafone, TiGo, Airtel, Glo Mobile and Expresso are 15% VAT on Imported Network Equipment & SIM cards; 20% on custom duties; 2.5% on National Health Insurance Levy (NHIL); 25% Corporate tax; 5% National Fiscal Stabilization Levy; 6% Communications Talk Service (CST) and $0.19 taxes on Termination/Interconnection Revenues.
Besides these, the industry players are also subjected to pay annual regulatory fees such as 1% Net Revenue each to the Ghana Investment Fund for Electronic Communications (GIFEC) and the National Communications Authority (NCA); another 1% fee on variable license; $2 million on International Gateway license; Right of way fees for fibre rollout; Microwave fees – per link; and numbering fee.
Additional taxes such as VAT, NHIL, CST and Customs Duties are levied on consumers from the purchase and activation of a device and SIM card to the usage of mobile services; including calls, SMS, data and airtime vouchers.
These additional taxes create barriers to affordability hinder economic growth and the realization of the positive externalities created by mobile services, players of the industry maintained.
Mr. Laryea, whose chamber speaks for the telcos lamented: “Mobile Operators in Ghana are subjected to the above taxes on all aspects of their operations, from sourcing the equipment necessary to develop network infrastructure, to the delivery of specific services and to their total revenues.
Many of these charges are either specific to the sector, or create a disproportionate burden on the mobile sector compared to other areas of the economy which reduces growth and investment in the mobile sector”.
For instance, in 2014, MTN Ghana alone paid GH¢605 million in the form of taxes to the government, whilst the total industry did in excess of ¢1.4bn in that same year, according to him.
While, over the past six years alone, mobile phone operators had invested over $44 billion in sub-Saharan Africa, according to the Mobile Economy 2013 report and this does not include international submarine cables.
These dollars know no national, racial, religious or sectional boundaries. Investment resources are nomadic and will settle where there’s an oasis, where returns are most promising.
This industry is the driver of economic growth and social development, contributing 10 per cent to government revenues. It holds the key to unlocking the potential in other sectors of the economy: financial services for the unbanked; e- and m-learning for the millions of young people yearning for education; m-health applications to improve maternal and child mortality.
Comparing Ghana’s tax regime to Kenya, Mr. Laryea explained to the newspaper that VAT exemptions on handsets in Kenya let to improve economic performance that East African country.
The Kenyan government exempted mobile handsets from VAT in 2009, which had previously been implemented at 16%.
In the three years following, the VAT reduction in Kenya contributed to an increase in handset sales of 200%, outpacing growth elsewhere in Africa. This increased penetration from 50% to 70%, above the 63% average across Africa.
Over the same period, the contribution of mobile telecommunications to the Kenyan economy grew by almost 250%, while mobile-related employment increased by 67%. Moreover, the impact of mobile telecommunications on Kenyan productivity increased by over 300% in five years, according to GSMA, Deloitte Mobile Telephony Taxation in Kenya 2011 report.
Although, the Ghanaian government in its 2015 Budget waived the 20 percent import tariffs on mobile phones, authorities at Ghana’s ports are still charging tariffs which supposed to be implemented by the Ministry of Finance three months after the approval of the budget by Parliament, the co-chairman of Mobile Phone and Accessory Dealers’ Association, Joseph Agyeman confirmed to the publication.
Adding her voice to the multiple tax scourge on telcos, the Corporate Services Executive of MTN Ghana, Mrs. Cynthia Lumor, recently told members of the Journalists for Business Advocacy (JBA), an offshoot of the Ghana Journalists Association (GJA), at a day’s encounter in Accra that the multiple taxes being charged by the government were having ripple effects on their businesses, and urged the government to withdraw some of the taxes.
On telcos tax obligation to the Ghana government, Mrs. Lumor stated that for very GH¢1 spent by a customer, a total of 34.5% of it goes into the payment of taxes such as the Value Added Tax (VAT), NHIL, NCA), and others.
While the MTN Ghana Foundation, and the various CRS wing of the telecom firms, have over the years spent over millions of Ghana cedis on numerous projects in health, education and economic empowerment across the country.
These efforts, according to her, had impacted positively on more than three million people directly and indirectly throughout Ghana.
Furthermore, when African Eye New questioned Mr. Laryea on ways to solving the multiple taxations and other challenges, he insisted: “Government’s ICT policy needs to be consistent with the day to day running of the Sector. Over taxing the sector for solving immediate short-term demands will stall or delay the connected society and digital inclusion we seek to achieve.”
Asked whether the telcos ever engaged the government on the multiplicity taxes, Mr. Laryea answered the affirmative.
He noted: “The Ghana Chamber of Telecommunications is constantly engaged with government on the issues of excess taxation on the industry, which ultimately has a negative effect on the wider economy through network expansions and spillovers required on other sectors for productivity”.
A renowned Chartered Economist and Senior Lecturer of the University of Cape Coast, Dr John Gatsi called on the government and telcos to discuss the issue in an objective manner so as to address the difficulties in the country’s telecom industry.
African Eye News.com
