Mobile Network Operators, MNOs, in operators in in Sub -Sharan Africa have invested $37 billion in their networks over the past five years, a new report by the GSMA has revealed.
This is despite combination of frequent tax changes and the high number of taxes levied on the operators which have continued to increase their complexity and operational burden.
The report was released at the ongoing GSMA Mobile 360 Africa event holding in Dar es Salaam, Tanzania by the GSMA findings from its latest report, ‘Taxing Mobile Connectivity in Sub-Saharan Africa: A review of mobile sector taxation and its impact on digital inclusion’.
The report provided an overview of the tax and fee regime applied to mobile services and its impact on affordability and investment in Sub-Saharan Africa.
It explored how mobile sector taxation can raise the affordability barrier in the region, undermining digital inclusion efforts. It also discusses how uncertain and complex taxation regimes affect operators’ ability to invest in infrastructure rollout.
“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,” Mats Granryd, Director General, GSMA, said, adding that, “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.”
Key report findings
Findings from the research demonstrated the distortionary impacts of sector-specific taxation, highlighting the potential economic benefits of rebalancing sector-specific taxes and regulatory fees.
According to the report, 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;
“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”, the report added in its key findings.
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;
Rebalancing sector-specific taxes and regulatory fees, the report recommended could 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.
By Emeka Aginam