Nigeria, Others to Earn $71Bn from Mobile Taxes

The GSM Association (GSMA), global trade association representing more than 750 GSM mobile phone operators across 218 territories and countries of the world has said that by removing mobile specific taxes, sub-Saharan governments will receive $71 billion in tax revenues from the mobile industry.

Gabriel Solomon, vice president, GSMA, said that this amount could be greater if mobile-ownership specific taxes, that all non-VAT taxes relating to handsets, subscription and connections, were removed.

According to him, for example, for the five year period 2007-2012 it is estimated that:

Tax receipts would increase by $930 million, rising 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 removed all non-VAT mobile ownership taxes in 2007

"By 2012, Chad’s tax receipts would be approximately 30per cent higher, Ghana’s 20 per cent, Cameroon and Nigeria’s 15 per cent, Republic of Congo’s 11 per cent, Malawi’s eight per cent and Zambia’s seven per cent; the average cost of owning and using a mobile phone would fall substantially, in Republic of Congo by -25 per cent, in Cameroon by -24 per cent, in Chad by -22 per cent, in Malawi by -18 per cent, in DRC by -16 per cent and in Nigeria by -14 per cent" he added

According to him, this would result in an additional 43.4 million mobile subscribers in those countries, increasing the 2012 projected weighted average penetration rate from 33 per cent to 41 per cent For the 10 year period 2007 – 2017 it is estimated that:

In Ghana, if all non-VAT taxes were removed in 2007, by 2017 tax revenues would be 38 per cent above the base case and penetration would be 28 per cent higher.

In Cameroon, if non-VAT taxes were removed on handsets only in 2007, by 2017 tax revenues would be 24 per cent above the base case and penetration would be 43 per cent higher.

In sub-Saharan Africa, eight governments levy luxury taxes on air time, 24 governments levy luxury taxes on handsets and more than 25 governments levy luxury taxes on equipment.

In 2006, mobile tax contributions are broken down into the following categories:

35 per cent net VAT on services and handsets; 34 per cent corporate and employment taxes; 20 per cent import duties on handsets and equipment; and 11 per cent other mobile specific consumption taxes such as air time tax.

If non-VAT taxes 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.