50% of every voice call made and data usage rates go to gov’t as taxes
Adnan Adams Mohammed
The Ghana Chamber of Telecommunication is alarmed that the telecommunication companies are being overburdened with taxes, levies and other charges and fears more taxes in the next budget as the government intend to pursue austerity measures to help put the economy into shape.
It says, from every voice call made, half (50 percent) of the call rate/cost goes to the government as taxes and levies among other charges. So the reason why call rates or charges seems expensive for phone users and also making the cost of operations of the telecos overbearing.
As the world was overwhelmed with the economic downturn effect of the coronavirus pandemic leaving governments, companies and private individuals with economic hardships, many countries will be implementing austerity measures to help get the economy back normal, as such, governments are looking at increasing taxes and the telecos are easy to target always to the government when it wants to increase or introduce additional taxes.
But, the Chamber has appealed to the government on behalf of its members, not to overburden the already overtaxed industry further noting that, in spite of the heavy tax burden, the telecommunication 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 the need for policy to support and enable even more investment by all players into the ecosystem to meet customer demand for mobile services,” Ken Ashigbey, CEO of the Ghana Telecoms Chamber said at a press event, last week, in Accra.
“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.”
“The high cost of spectrums has to change and fortunately for us, when you look at the NPP manifesto (paragraph 52), they mention the fact that they will want to reduce the cost of data and one of the things to do is to reduce license cost, spectrum cost, taxes on services, devices and sim cards (cassette levies) and harmonize as well as regularize all MDAs and MMDAs levies in line with other industries charges to be able to make that happens”, he noted.
According to the Chamber, the way forward for 2021 is to sit with government to discuss and collaborate on the issues of tax policies to bring certainty and predictability in the industry.
“If you change Communication Service Tax (CST) twice in two years ….definitely it makes difficult for everyone to plan…when taxes are introduced anyhow. When you say you have brought in a fiscal stabilization levy and you say there is a ‘sunset clause’ which unfortunately the sun never sets as if we are in Pluto or somewhere.., definitely that is predictability. Investors when they are planning they will not be able to look into your space. So we need to have that conversation with government.”
Higher taxes on telecos operation which are passed on to consumers in a form of operational cost rather reduced government’s revenue targets, due to the principles of the price elasticity of demand, where consumers are not willing to buy more when there is even a little increase in price. A typical example was the CST; when the government increased the rate from 6% to 9%, the government’s revenue target for the first and second quarters of this year were missed but, when the rate was reversed to 6%, the government exceeded its revenue target from CST in the third quarter.
A recent report findings from a Total Tax Contribution (TTC) survey by the Ghana Chamber of Telecommunications has brought to light the significant contribution of the telecommunication sector towards Ghana’s socioeconomic development. According to the data, the sector’s total taxes and payments to government amounted to over GH¢3.2 billion in 2019.
This figure represents approximately 9.5 percent of Ghana’s annual total tax revenue earnings.
The Chamber used a TTC methodology to measure total cash payments for business operations by its members over the period.
Key highlights from the study shows Communication Service Tax (CST) was GH¢414 million, Value Added Tax (VAT) was GH¢480 million, Corporate Income Tax (CIT) stood at GH¢832 million, Withholding Tax (WHT) was GH¢415 million, Import Duties stood at GH¢210 million and National Fiscal Stabilization Levy (NFSL) cost the members GH¢71 million.
The Surcharge on International Incoming Traffic (SIIT), which is the quantum of six cents per every minute of call that comes from overseas into the country, also amounted to GH¢107 million in 2019.
The Pay-As-You-Earn (PAYE) tax stood at GH¢96 million and finally the National Fiscal Stabilisation Levy (NFSL), stood at GH¢71 million.
The study further showed that the mobile industry widely provides 6,700 direct jobs and over 1.8 million indirect jobs, contributing 2.93% to (Non-oil) GDP, and invested GH¢1.55 billion in capital expenditure within the fiscal year 2019.