Taxes consume 48% of telcos’ annual revenue – Study

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In 2019, almost half of revenues generated by telecom industry players, comprising of mainly telcos and telecom infrastructure companies went to government as taxes. 

This is contained in a report from a Mobile Industry Transparency Initiative study conducted by the Ghana Chamber of Telecommunications.

The study focused on members of the chamber – MTN Ghana, Vodafone Ghana, AirtelTigo, Huawei, C-Squared, ATC Corp, Helios Towers and Comsys, and it showed that their total contribution to government in taxes stood at GH¢3.2billion, which is 48 percent of all revenues.

The study revealed that the industry’s tax contribution represented about 9.5 percent of the nation’s annual total revenue basket, underscoring the industry’s support for socioeconomic development of the country.

Key highlights from the study, which focused on the 2019 financial year, showed that Communication Service Tax (CST) was GH¢414million; Value Added Tax (VAT), GH¢480million; Corporate Income Tax (CIT), GH¢832million; Withholding Tax (WHT), GH¢415million; Import Duties, GH¢210million; and pay-as-you-earn (PAYE) tax stood at GH¢96million.

The Surcharge on International Incoming Traffic (SIIT) was GH¢107million. SIIT is the quantum of six cents per every minute of call that come from overseas into the country. Mobile Network Operators pay that to the National Communications Authority (NCA), the industry regulator.

There was also the National Fiscal Stabilization Levy (NFSL), which was GH¢71million. The NFSL was introduced in 2013 to stabilize the economy over a period of 18 months ending December 2015, but has continuously been renewed.

The study also shows the mobile industry widely provides 6,700 direct jobs and over 1.8 million indirect jobs, contributing 2.93 percent to (Non-oil) GDP; and invested GH¢1.55billion in capital expenditure within the fiscal year 2019.

Tax burden

The Telecoms Chamber noted that in spite of the heavy tax burden, the telecoms industry continues to commit investible funds into capital expenditure to meet customer service quality and experience needs. “CAPEX investment has increased exponentially in the fiscal year; however, there is a need for policy to support and enable even more investment by all players into the ecosystem to meet customer demand for mobile services,” said Dr. Ing. Kenneth Ashigbey, CEO of the Chamber.

Tax restructurings

The mobile industry believes that policy-enablers such as tax reforms, tax rebates in relation to import of infrastructure and equipment, could improve the affordability of mobile technology and services for customers – yielding greater strides for all stakeholders in the long-term. Data from the study showed the industry wields over 41 million active voice SIMs, 28 million active data subscribers, 14.5 million active mobile money customers and over 300,000 active merchants/agents.

The study further noted that, “appropriate spectrum management framework [by the industry regulator] will provide needed clarity for more funding into existing and new technologies such as 4G and 5G, which require further policy direction and support to grow”.

Slowing digitization agenda

The chamber noted that some actions of government, including what the chamber describes as overtaxing the sector, are frustrating its own digitisation agenda. “The issue of ‘we want money now’ is an action that is sacrificing the digitisation agenda in terms of being able to push it. Truth be told, most of us in the cities are benefitting from the digitisation agenda, but for it to take root we need to make sure that it is pervasive throughout the country.

“For that to happen, it is going to have to go beyond what the Ghana Investment Fund for Electronic Communications (GIFEC) does. It will require a lot of investment into those areas to make sure that the last person in the last region in the last village is also connected; and these are some of the things that we hopTxe government is going to work with us to be able to do,” Dr. Ashigbey said.

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