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GSMA Calls for Re-Evaluation and Reduction of Mobile-Specific Taxation across Sub-Saharan Africa
|By Business Wire
|September 1, 2014 04:00 AM EDT
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 released two studies that explore various aspects of
mobile-specific taxation in Africa and show that this burden 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. 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.
“Sub-Saharan Africa is the fastest-growing region globally, with 328
million unique mobile subscribers and an annual growth rate of 18 per
cent over the last five years. However, with subscriber penetration of
just 37 per cent, 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.”
Report Highlights Negative Economic Impact of SIIT in Africa
The report Surtax on International Incoming Traffic (SIIT) in Africa
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)1 that shows that imposing higher charges
for the termination of international inbound traffic suppresses demand.
Similar to the GSMA’s study, the OECD report concludes that those
governments that impose higher termination charges do not see their
revenues increase proportionately. The report outlines the impact for
consumers, governments and businesses:
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;
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
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 per cent of all international incoming traffic is from
countries in the region, and in some countries, such as Tanzania, over
50 per cent of calls originate within Africa.
USF Report Highlights Need For Alternative Methods to Achieve
The Sub-Saharan Africa Universal Service Fund Study finds that USFs in
the region do not appear to be the most appropriate mechanism for
providing universal access and service, and to furthering social and
economic improvement in a proactive, cost-effective and transparent
manner. Generally, 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 monies 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. The study found that alternative
approaches to achieving universal service, such as license obligations,
are often more effective than USFs.
Both reports have identified countries within the region that have
recognised the negative impact of both the SIIT and USFs on trade and
regional integration. The two studies conclude that in light of these
negative consequences, other governments should re-consider the SIIT and
USF and assess the specific impact on their economies and on economic
development for the region as a whole.
“Mobile is an important contributor to the economy of Sub-Saharan
Africa, accounting for more than six per cent of the region’s GDP, more
than any other comparable region globally,” continued Phillips. “As our
research has shown, taxation as a proportion of the total cost of mobile
ownership in the region is also higher than the global average, a factor
that makes mobile services less affordable for end users. The SIIT is
clearly being used as an opportunistic short-term revenue tool by some
governments and, in reality, USFs have become an unnecessary levy on the
telecommunications industry. We strongly feel that eliminating harmful
mobile-specific taxation would benefit consumers, businesses and
governments by encouraging the take-up of new mobile services, improving
productivity and boosting GDP and overall tax revenues in the longer
Notes to Editors
OECD (2014), "International Traffic Termination", OECD
Digital Economy Papers, No. 238, OECD Publishing 10.1787/5jz2m5mnlvkc-en.
The GSMA reports can be found at: www.gsma.com/publicpolicy/tax/research-and-resources
About the GSMA
The GSMA represents the interests of mobile operators
worldwide. Spanning more than 220 countries, the GSMA unites nearly 800
of the world’s mobile operators with 250 companies in the broader mobile
ecosystem, including handset and device makers, software companies,
equipment providers and Internet companies, as well as organisations in
industry sectors such as financial services, healthcare, media,
transport and utilities. The GSMA also produces industry-leading events
such as Mobile World Congress and Mobile Asia Expo.
For more information, please visit the GSMA corporate website at www.gsma.com.
Follow the GSMA on Twitter: @GSMA.
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