Recent findings by the GSM Association, a trade body that represents the interest of mobile operators worldwide, have revealed that the high mobile sector taxation in most African countries have undermined the efforts of digital inclusion in the continent and the uncertain and complex taxation regimes are affecting operators’ ability to invest in infrastructure rollout.
The GSMA report on ‘Taxing Mobile Connectivity in Sub-Saharan Africa: A review of mobile sector taxation and its impact on digital inclusion’, finds that; in Sub-Saharan Africa, more than 420 million people (43 per cent of the population) subscribed to a mobile service at the end of 2016; but the region faces a significant digital divide with only 26 per cent of the population subscribed to a mobile internet service at the end of 2016.
Experts say the digital divide and low internet service subscription is most likely as a result of multiple and unstable mobile taxation of mobile operators, who in turn pass the high costs to the subscribers at the bottom of the value chain.
“Mobile connectivity is a critical enabler of economic and social development but in many countries, particularly developing countries with large informal sectors, the mobile sector is over-taxed, relative to its economic footprint,” said Mats Granryd, Director General, GSMA.
According to Granryd, “the excessive taxation applied to the mobile sector ignores its positive economic contributions and leads to negative affordability and investment impact. In the current economic climate, it is paramount for governments to foster, not hinder, growth.”
Findings reveal that in 2015, the mobile sector paid, on average, 35 per cent of its revenues in the form of taxes, regulatory fees and other charges in the 12 Sub-Saharan African countries for which this data is available. Around 26 per cent of the taxes and fees paid by the mobile industry related to sector-specific taxation rather than broad-based taxation; mobile network operators’ (MNOs) contribution to government tax revenues outweighs their size in the economy.
For example, in the DRC, sector revenues accounted for 3 per cent of GDP in 2015 while mobile tax payments represented more than 17 per cent of total government tax revenues; for 27 countries in the region where data is available, the total cost of mobile ownership (TCMO) for purchasing a handset and 500 MB of data per month represents, on average, 10 per cent of monthly income, well above the 5 per cent threshold recommended by the UN Broadband Commission.
The GSMA report says MNOs in the region have invested $37 billion in their networks over the past five years. However, a combination of frequent tax changes and the high number of taxes levied on MNOs increases the complexity and operational burden and countries that have a higher level of taxes and fees as a proportion of sector revenues tend to have relatively low levels of readiness for mobile internet connectivity.
Talking about the damaging effects of multiple taxes to operators, Funso Aina, Public Relations Manager at MTN Nigeria told BusinessDay that; “Unfortunately, multiple taxation and other challenges continue to have a negative impact on the operations of operators. We constantly engage government at all levels to address the imposition of unstructured fees and charges by the various labels of government and service interruptions arising from collection attempts.
“We have made it clear that illegal taxation alters incentives for production and consumption, and so economic distortions will be prevalent where the burden of taxation is high. The burden is subsequently transferred to end users, which makes costs higher and affordability slows penetration,” he added.
Telecommunications industry analysts have recommended rebalancing sector-specific taxes and regulatory fees which can promote connectivity, economic growth, investment and fiscal stability.
The GSMA report says that a number of principles for reforming sector-specific taxation and fees should be considered by governments in Sub-Saharan Africa in order to align mobile taxation with that applied to other sectors and with the best practices recommended by international organisations such as the World Bank and the IMF.
JUMOKE AKIYODE with wire report
