The mobile sector is over-taxed in Africa, GSMA says

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Mobile industry, Tax, GSMA

 

By Martin Ekpeke

The GSMA, the global body that represents of mobile operators worldwide has claimed that the mobile sector in Africa is over-taxed, despite the fact that mobile connectivity is a critical enabler of economic and social development.

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GSMA stated this in Dar es Salaam, Tanzania during the Mobile 360 Event, while announcing its findings from its latest report, ‘Taxing Mobile Connectivity in Sub-Saharan Africa: A review of mobile sector taxation and its impact on digital inclusion’.

“Mobile connectivity is a critical enabler of economic and social development, but in many countries, particularly developing countries, the mobile sector is over-taxed relative to its economic footprint,” said Mats Granryd, Director General, GSMA.

Granryd believes that the excessive taxation applied to the mobile sector ignores its positive economic contributions and leads to negative affordability and investment impact, arguing that in the current economic climate, it is paramount for governments to foster, not hinder growth.

Key findings from the report show 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, stressing that around 26 per cent of the taxes and fees paid by the mobile industry related to sector-specific taxation rather than broad-based taxation;

It also finds out that 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;

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.

Recommendations
Rebalancing sector-specific taxes and regulatory fees can promote connectivity, economic growth, investment and fiscal stability. 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:

  • Reduce sector-specific taxes and regulatory fees;
  • Reduce complexity and uncertainty of taxes and fees on the mobile sector;
  • Remove consumer taxes that target access to mobile services;
  • Support effective pricing of spectrum to facilitate better quality and more affordable services;
  • Reduce or remove import duties;
  • Implement supportive taxation for emerging services such as mobile money;
  • Remove taxes on international incoming calls; and
  • Avoid excessive regulatory fees and taxes on revenues.

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