Zambia shelves telecom imports tax

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The Zambian government has suspended all taxes imposed on communication equipment imported into the country by mobile phone operators.

The suspension of taxes means operators will now import for free telecom equipment in a bid by the Zambian government to quicken network roll-out in remote rural areas that still remain unconnected to mobile communication.

The government claims it wants to stimulate growth of the telecom sector that is dominated by three operators - MTN, Airtel and Zamtel. For the past four years, operators have been pushing the Zambian government to give them tax relief to be able to expand their networks to remote rural areas.

Throughout this time, however, the government refused to provide the tax relief despite agreeing that the extension of ICT facilities in rural areas is key to improving the livelihood of residents.

The government further claimed that operators were making enough profit from subscribers to enable them to roll out their networks even to rural areas. In an unexpected U-turn, the government has now frozen all taxes imposed on telecom equipment being imported by operators for network expansions.

Through the Statutory Instrument (bylaw) number 23 of 2011 under the Customs and Exercise Act, the Ministry of Finance and National Planning has waived all taxes for telecommunications site equipment. It is, however, still not clear on how long the tax holiday will last. But the move is expected to quicken network roll-out and increase competition among operators that want to grow their customer base and improve their balance sheets.

The Zambia Chambers of Commerce and Industry (ZACCI) says the move will accelerate tele-density across the country.

“Telecommunication is a catalyst to development. When people are able to access communication services, it is most likely that development will follow,” says ZACCI president Geoffrey Sakulanda.

Rural areas have always been considered by operators in Zambia as economically unviable to recoup the investment compared to urban areas. All the three operators claim they want to roll out their networks to remote rural areas to break the communication barrier that hinders rural dwellers from participating in the national development process.

Last year, the Zambian government raised taxes by 5% for any telecoms company whose profit margin exceeded $54 000, in addition to the current standard company rate tax of 35%.

Operators, however, warned that although the new tax addressed the Zambian government's revenue concern, the increase had a long-term effect on the growth of the sector as it would slow down network construction and thwart attempts to cut the high cost of communication in the country.

The government has already refused to issue a fourth mobile licence, claiming it is creating a conducive environment that will allow the three operators to compete favourably and bring down high prices.

Last month, Airtel announced that it intends to build 200 new transmission towers by the end of this year in addition to the existing 800 in a bid to boost its market share from about 70% to 80%.

MTN, on the other hand, plans to invest an additional $40 million this year in network upgrades and expansion to raise market share to 37%. Zamtel says it wants to become a market leader in the next five years with 30% market share in the provision of mobile phones and Internet services.

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