Review mobile taxation across sub-saharan Africa

The GSMA today called upon governments in Sub-Saharan Africa (SSA) to review their approach to the increasing tax burden imposed on the mobile industry.

The GSMA has released two studies which shows how mobile-specific taxation is stifling economic growth in those countries that have introduced mobile-specific taxation. The first report, ‘Surtax on International Incoming Traffic (SIIT) in Africa’, examines the impact of SIIT in Sub-Saharan Africa and concludes that the introduction of SIIT can lead to less revenue for mobile operators and governments and higher prices for consumers.

The report studies the effects of the SIIT in six countries in Sub-Saharan Africa and on regional integration. The report’s findings are in line with a recent publication from the Organisation for Economic Co-operation and Development (OECD) that shows that imposing higher charges for the termination of international inbound traffic suppresses demand.

For consumers SIIT effectively fixes prices for international traffic termination and in these countries where it is imposed, the SIIT has caused the price of terminating international incoming calls to increase by an average 97 per cent, with an increase of up to 247 per cent in Burundi.

Fpr governments SIIT has already shown its potential to create economic losses to governments that impose it. The report estimates that, in the absence of the SIIT, mobile operators could have terminated an extra 1.2 billion international minutes and generating $86 million in revenues from June 2010 to March 2014, indicating that governments could have gained an extra $27.5 million across the period had the SIIT not been introduced; and For businesses SIIT creates significant extra costs to African businesses that trade with, and therefore call, businesses in countries where the SIIT has been imposed, negatively affecting regional integration.

Evidence from mobile operators indicates that nearly 40 percent of all international incoming traffic is from countries in the region, and in some countries, such as Tanzania, over 50 percent of calls originate within Africa.

A second report, ‘Sub-Saharan Africa Universal Service Fund (USF) Study’, found that most of these funds are not succeeding in delivering their stated goal of widening access to telecommunication services and that alternative market-based solutions are more effective.

The report found significant deficiencies in fund structure, management and operation throughout the SSA region. The report concludes that consideration must be given to disbanding inactive funds and returning the remaining money to the operators who paid the levies in the first place and, where this is not feasible, gradually reducing the levy collected for either inactive or low activity funds and gradually phasing out the funds.

“Sub-Saharan Africa is the fastest-growing region globally, with 328 million unique mobile subscribers and an annual growth rate of 18 percent over the last five years. However, with subscriber penetration of just 37 percent, there is clearly still huge potential for greater growth ahead,” said Tom Phillips, chief regulatory officer, GSMA.

“Beyond further adoption of basic voice services, the region is starting to see an explosion in the uptake of mobile data. However, a short-term focus by some countries on generating revenue through increasing the SIIT, combined with the continued imposition of USF levies despite accumulated funds that are not being effectively employed, will clearly have a negative impact on the domestic mobile sector and other businesses in the region,” added Phillips.

“Mobile is an important contributor to the economy of Sub-Saharan Africa, accounting for more than six percent of the region’s GDP, more than any other comparable region globally,” continued Phillips.

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