The mobile industry will generate $71 billion in tax revenues in sub-Saharan Africa between 2000 and 2012, but that figure would be higher still if governments removed taxes that treat mobile phones and services as luxury goods.
This is one of the key findings of research commissioned by the GSMA and conducted by Frontier Economics, announced in Sandton yesterday.
According to the study, uptake of mobile services in the region is being held back by mobile-specific taxes on handsets, airtime, and telecoms equipment, which increase costs for consumers and deter investment by mobile operators.
If non-VAT taxes were removed, governments in the majority of countries would receive incrementally higher tax returns, as industry growth boosts total VAT receipts along with corporate and employment tax receipts, it says.
An additional 43 million mobile subscribers would be connected by 2012, if all mobile specific-taxes in Sub-Saharan Africa had been removed in 2007, the GSMA says. This would lead to additional tax receipts of $930 million between 2007 and 2012.
Tax receipts in sub-Saharan Africa would increase from $28.9 billion to $29.9 billion, if the governments of Nigeria, Kenya, Tanzania, Cameroon, Ghana, Zambia, DRC, Republic of Congo, Gabon, Madagascar, Burkina Faso, Chad and Malawi had removed all non-VAT mobile ownership taxes in 2007, the study finds.
By 2012, Chad's tax receipts would be approximately 30% higher, Ghana's 20%, Cameroon and Nigeria's 15%, Republic of Congo's 11%, Malawi's 8% and Zambia's 7%, it says.
The average cost of owning and using a mobile phone would fall substantially, with the Republic of Congo seeing a 25% decrease, Cameroon 24%, Chad 22%, Malawi 18%, Democratic Republic of Congo 16% and Nigeria a drop of 14%.
This would result in an additional 43.4 million mobile subscribers in those countries, increasing the 2012 projected weighted average penetration rate from 33% to 41%, the GSMA says.
Held back
"Mobile consumers in Africa face some of the highest tax rates in the world, which hit poorer members of society hardest," said GSMA senior VP Gabriel Solomon.
These taxes are, according tom him, holding back mobile adoption in Africa, curbing economic growth and, ironically, are actually lowering the total revenues collected by governments.
GSMA spokesman David Pringle has previously noted that there is often a dichotomy of interest between the finance ministry, which sets taxation policy, and the telecoms ministry, which sets regulatory policy.
"The finance ministry often has a short-term view, an annual budget to meet, and can regard mobile as a cash cow. But taking a medium-term view and removing luxury taxes would actually increase the total tax paid by the industry," he said.
The GSMA launched its report on the impact of taxation on mobile services and products in East Africa at the ITU Telecoms Africa 2008, in Cairo, earlier this month.
The report also found that countries in the region levied the highest luxury tax on mobile services and products.
Uganda has the most expensive regime, charging an excise duty of 12% in addition to the 18% VAT rate, says the GSMA. Rwanda has proposed charging an excise duty of 10%. Currently, its VAT rate is 18% and the combined tax on mobile services would add up to 28%, making its mobile phone taxes the second highest on the continent.
Tanzania charges 7% in excise duties, with VAT coming in at 20%, while Tanzania charges 10% in excise duty and 16% VAT.
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