GSMA Orders Zim & other African governments to reduce handset taxes on Mobile Network Operators

The Groupe Speciale Mobile Association represents the interests of mobile operators worldwide, uniting nearly 800 operators with almost 300 companies in the broader mobile ecosystem, including handset and device makers, software companies, equipment providers and Internet companies, as well as organizations in adjacent industry sectors.

By Cisco Eng. Shingie Lev Muringi 

Since the smartphone devices hit the market in the early months of 2010, African governments have been identified to be charging exorbitant taxes on their mobile network operators when importing popular handsets such as iPhones, Samsung smartphones, tablets and other ICT gadgets.

Econet as the largest service provider has always been crying foul on such ridiculous taxes which are not viable for a high cost economy like Zimbabwe which in turn will force them to peg higher prices when reselling those devices locally.      

However, African governments have been told to reduce handset taxes, roaming rates, decongest the spectrum and have strong infrastructure to improve telecommunications sector.

The GSMA head of mobile for development, Ms Yasmina McCarty, said high excise duty on handset was making the products unaffordable to the majority of people. She was speaking during a recent conference on mobile phone companies here.

GSMA represents the interests of mobile network operators worldwide. It unites nearly 800 operators. GSMA proposes that import duty on handsets be reduced to 10 from 17 percent.

Consumers are subject to taxes on devices, subscription and usage, leading to the increase in total cost of mobile ownership and create barriers to affordability.

In that regard, mobile tax reforms, according to her, would make devices affordable and have impact on number of Internet connection, Gross Domestic Product (GDP) and tax revenue.

“According to research conducted last year, with a reduction in the tax on mobile to 10 percent, 2 million more people will be connected to the Internet by 2020,” she said.

Also, there would be an addition of $549 million in GDP and $11 million in tax revenue, according to GSMA research.

Vodacom Tanzania chief executive officer Ian Ferrao says: “With the high level of taxation, Tanzania reduces the room for investment, the situation which calls for the government to take quick measures to address the problem.”

Multiplicity of taxes jeopardises the industry’s growth. Telecom is one of the most heavily taxed sectors in Tanzania, with operators subject to 10 different taxes, along with regulatory fees and charges, according to Deloitte’s 2015 survey.

Through these various taxes, operators pay up to $540 million (over Sh1,2 trillion at the prevailing exchange rate) in taxes annually, accounting for 50 percent of their revenue and contributing over 11 percent of total the taxes in Tanzania.

Taxes account for about 35 percent of the costs of mobile ownership in Tanzania. This is the second highest level in Africa, and almost double the global average.

Mr Ferrao called on the government to address the problem of congested spectrum, by ensuring that rules do not lock up innovation and investment in the market. Regulatory caps on how much spectrum an operator is allowed to hold could prevent the consolidation required to fuel further network investment, according to him.

“The shortage of appropriate spectrum for mobile operators should be addressed.”

Tigo Rwanda deputy chief executive officer Chantal Kagame urged policy makers to ensure that the low frequency spectrum below 1gigahertz was employed to extend mobile broadband coverage across the country. The move, according to her, would reduce the digital divide between the urban and rural areas, boosting economic activity and hence helping alleviate poverty and improving health care.

She also called for improvement of access and affordability of mobile services in Sub-Saharan countries including Tanzania.

“I call on all sub- Saharan countries to lower loaming rates . . . Rwanda, Kenya and Uganda have already shown initiatives of which I hope Tanzania would walk on the same footsteps,” she expressed her optimism.

The GSMA representative from the Democratic Republic of Congo, Mr Thomas Losendjots, said price war in most of African countries was an obstacle.

“Governments in respective countries should reduce complexities, by making services accessible and affordable, to achieve economies of scale.”

The chairman of Alliance for Affordable Internet, Mr Omobola Johnson, wanted governments to cooperate with businesses to improve infrastructure.

“For African countries not to be left in unconnected world, governments should collaborate with the private sector and non-governmental organisations to upgrade infrastructure,” said Mr Johnson.

The minister for Works, Transport and Communications, Prof Makame Mbarawa, pledged to work with other stakeholders to strengthen the sector.

“I’m optimistic that in partnership with the private sector we would bridge a gap between rural and urban areas. If the sector is to play a pivotal role and its impact to be felt, we need to work together for the betterment of our people.”

He promised that the government would continue improving environment for mobile phone companies operate smoothly to cut their operational costs and subsequent service costs.

The battle for relevance continues…follow Shingie Levison Muringi our Technology Research Specialist and Sub Editor on Twitter @ShingieMuringi1, Email [email protected] or direct Cell: 0775 380 652 for all the latest trending technological issues in and outside Zimbabwe.

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