The recent 4% reduction in Communication Service Tax (CST) may well be the middle-ground for all stakeholders. My personal view has always been that we need to strike a fair balance between generating extra revenue for the 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.
Telecommunication 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 in extension affect many economic activities of the nation.
Telecom for Vibrant Economic Growth
It’s been very obvious over the years that the growth of our telecom sector has generated many business activities within the Ghanaian economy. Today talking, texting and transferring money via the phone, one can complete a whole transaction from the convenience of his or her home.
Delivery of goods ordered and paid for online, for example, is now common here in Ghana, thanks to enhanced communication among the population. The increased effect of telecom services on various economic activities cannot be underestimated.
The Ugandan Example
Higher levies on telecom services and products have never helped. In Uganda, for example, it is reported that the introduction of higher charges in the communication industry has generally proven not to be good. In fact, the Guardian newspaper featured a story last year on how millions of Ugandans had no option but to quit Internet services as more taxes are imposed on their online activities.
ITU’s Take
“There is growing evidence that the diffusion of telecommunication/ICT services – both voice services and broadband – has a spill-over effect on economic growth, though there is less agreement about the size of that effect. In these circumstances, a tax that slows down the diffusion of telecommunication/ICT services defers the arrival of these benefits; it may also reduce, rather than increase, tax revenues by causing the economy to grow more slowly. This depends on some key parameters, the values of which vary from country to country and about which there is as yet no certainty.” – ITU
Some Telecom Tax Elements
Some say most of the Telecom companies are private institutions that have a commodity to sell to stay profitable, with terms and conditions they think will best suit their business.
Undeniably, data is expensive here in Ghana when you compare prices from other jurisdictions. But if the likes of MTN, AirtelTigo and Vodafone have to pay corporate taxes, import duties on machinery and parts, PAYE, VAT and SSNIT etc., they will obviously push these burdens on the consumer.
The Balance
Where do we strike the balance? Encourage Telecom Facilitated Economic Growth or Increase Government Revenue for Public Services?
With participation from the likes of Zain, Buzz, Mobitel, Ghana Telecom and now MTN, Vodafone, AirtelTigo and Glo, Ghana has seen significant effects of telecom activities in the economic growth of its population.
We should also be frank that government has lot of public services to render to the same vibrant population. The telecom-enabled growth equally offers government a good opportunity to tap into more revenue as required.
But as the research by Telecommunication Development Bureau (BDT) in collaboration with the Telecommunication Standardisation Bureau (TSB) of ITU suggests, there is always need for a thorough engagement with all stakeholders in coming out with the best modalities of revenue generation in the telecom sector. This paper further cautions against a one-sided approach to this. In fact, it entreats stakeholders to weigh having great revenue from the sector to support public service against sustaining and boosting the gains made by telecom-facilitated economic activities.
GSMA’s Submission
“The GSMA calls on governments to urgently review its 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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