Striking the CST Balance:  Boosting gov’t revenue or telecom facilitated economic growth

Image credit: betterthancash.org

The recent happening in the telecom sector have compelled me to do this piece again. My personal view on this is that we need to strike a fair balance between generating extra revenue for government and encouraging telecom-facilitated economic growth.

 ‘President Kagame says mobile phones are no longer a luxury but a necessity for Africans. Yet the majority of African governments levy luxury taxes on air-time, handsets and equipment. These taxes are borne by consumers and have a negative impact on affordability. They are also regressive in nature, penalising poorer sections of society.’……………GSMA -Taxation and the growth of mobile services in sub-Saharan Africa Report

With growth of the telecommunications sector in Uganda has come the emergence of a vibrant sub-sector, mobile money (transfer of money through mobile phones).  This service

enables almost-instant sending and receiving of money across the country, and with some

operators even out of the country.  Today, the service has almost 20 million subscribers in

Uganda; and 39 percent of the country’s GDP moves through this service. In 2013, Local Excise

Duty on money transfer at 10 percent was introduced as an attempt by the country’s tax body to tap into this lucrative sector, and indirectly reach the ever-burgeoning but elusive informal sector.

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This tax, however, has been condemned as distortionary to the industry, regressive in its incidence, and part of the general discriminatory nature of taxes against the telecommunications industry in Africa.  This research seeks to assess the exact nature of this tax and its impact on the mobile money service as an industry, and make recommendations on how it can be improved.

I have had my own shock-experience with the new CST increment deduction. I usually top-up my call credit using my mobile money account. In fact, sometimes thanks to interoperability I am able to move money in-between wallets to bundle data on whichever network I want to use at any given time.

On this particular day, the balances in both wallets were not enough to help with my usual bundle purchase, so I stopped by a vendor to buy a recharge-card. I needed to do some serious work in the night. I was now home and ready to begin my assignment, so I recharged using the card for my bundle. Then I got the confirmation message stating a lesser amount than what I had paid for the card.

You can imagine my frustration that night at about 10:30pm. I had no option than to go, pay-as-you-go – and in no time my credit got finished. My assignment was not completed and I was very disappointed. You see, communication services and products have become a necessity to most of us. Therefore, any barrier to our free and affordable access and usage will limit our individual and business growth – and by extension affect many economic activities in the nation.

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I have read some researche work on taxing in the communication industry and its effect in other jurisdictions. These reports have proposed guidelines and recommendations by the likes of the International Telecommunication Union (ITU) and GSMA.

The below call by the GSMA is still valid today, especially with our current situation between government and the Telecom players.

“The GSMA calls on governments to urgently review their mobile sector taxation strategies in consultation with the industry and other experts, with a view to implementing an optimal taxation regime.”

 

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