High Levels Of Taxation Stifling African Mobile Growth

by Lorys Charalambous Tax-News.com, Cyprus

16 November 2012

African governments have been urged to reconsider the increasing tax burden on both mobile phone users and operators if the current trend of rapid growth within the area is to continue.

The GSM Association (GSMA) has revealed that sub-Saharan Africa (SSA) is the fastest growing mobile market in the world, with average annual growth rates of 44% per year since 2000 and a resultant increase in mobile connections to 475 million, compared to just 12.3 million fixed line connections, the highest mobile to fixed line connection ratio in the world.

However, Tom Phillips, GSMA Chief Government and Regulatory Affairs Officer warned that “it is imperative that governments work in partnership with mobile operators to enable the industry to thrive throughout the region, ultimately providing affordable options to connect its citizens."

Africa has the highest taxation as a proportion of the cost of mobile ownership amongst any developing regions worldwide, with taxes on handset and mobile devices much higher than elsewhere. Tax as a proportion of total cost of mobile ownership is higher than the global average for 17 countries in the SSA, and has increased from an average of 18.1% in 2007 to 19.3% in 2011.

The GSMA is concerned at the level of taxation at both the consumer and the operator level. At the consumer level, levies include customs duties, excise taxes and luxury taxes imposed on imported handsets, in addition to mobile-specific taxes ranging from airtime excises applied to mobile telephony usage, to fixed contributions on connections, handsets and rental. It is felt that this high level of taxation ignores the reality of mobile usage as an essential component of everyday life for the population.

Industry specific operator taxes include spectrum fees, numbering fees, Universal Service Fund contributions such as technology taxes, and other special fees such as the Health Insurance Tax in Ghana. In recent years, several SSA countries (Congo, Senegal, Ghana, Gabon, Liberia, Central African Republic, Guinea and Rwanda), have introduced another telecommunications specific tax, the Surtax on International Incoming Traffic.