Governments in East Africa need to reassess tax levies imposed on the mobile telecommunications market, says Gabriel Solomon, director of government and regulatory affairs at the GSM Association, a global trade association for mobile phone operators.
His comment comes after consultancy Deloitte released the results of a study, undertaken for the GSM Association, in collaboration with GSM Africa.
The study revealed East Africans pay taxes of between 25% and 30% on mobile phone services, as opposed to 17% in the rest of Africa. "High taxes on the sector are hampering its growth and development in the region," Solomon says.
Tax strategy
Governments in the East African region need to consider a long-term strategy when it comes to cutting taxes in the telecoms industry, he says. The study shows that if the governments in Uganda, Tanzania and Kenya were to cut mobile taxes today, their total tax receipts would rise in the medium- to long-term.
East African countries, unlike the rest of Africa, impose additional taxes, including excise tax on top of the usual VAT, says Solomon.
For example, a cut in excise duty in Uganda today, from 12% to 8% on mobile services, would lead to an increase in total tax receipts of up to 2.5% between 2007 and 2017. It would also increase gross domestic product by up to UGX179 896 ($102 915), the equivalent of 0.6%, between 2007 and 2017, the study explains.
Uganda has the highest mobile phone tax in Africa, at 30%.
Solomon notes it is obvious that where mobile telecoms taxation levels are affordable, development in the sector occurs on a large scale.
"Nigeria has a fairly low tax regime that stands at 5%, which has encouraged mammoth investments in the sector over the past few years."
Solomon believes dialogue needs to be implemented between the telecoms sector and government, to promote lower taxes on the mobile telecoms market.
He is attending the Sub-Saharan ICT conference, hosted by the US Trade and Development Agency in California, where the GSM Association will have the opportunity to address East African leaders on the issue.
Share
