The NEPAD, Regional Integration & Trade Department (ONRI) of the African Development Bank (AfDB) is to undertake a study on taxation of telecommunications services and related products in the ECOWAS region.
The AfDB will use case studies from Ghana and the Republic of Guinea to enhance the study.
“The study will define the modalities for abolishing tax on international incoming calls to ECOWAS region and also conduct an analysis on how sectoral taxes will impact such a move in all member states in the ECOWAS/UEMOA region, and taking case studies from Ghana and the Republic of Guinea Conakry, who are already implementing taxes on international incoming calls,” the AfDB said in a notice May 28, 2012 calling for consultants to help conduct the study.
According to the Bank, the taxes to be investigated will include an “analysis of how the taxes and import duties on equipment, taxes on the retail supply of handsets, taxes on services and (more difficult) taxes on profits will have an impact on ECOWAS member States economic and GDP if taxes on international incoming calls are removed”.
The study will be completed within a period of four months and it will cover countries in the ECOWAS region.
The AfDB says after the study, it expects the region to have a sound Telecommunication Sector Taxation Policy based on empirical data.
By Ekow Quandzie
The AfDB announces that they will undertake a study on telecom services taxation and, at the same time, it seems that they already have the results of this upcoming study. They clearly state that the purpose of the study is to “define the modalities for abolishing tax on international incoming calls to ECOWAS region”. How can they talk about abolishing a tax before they compare its so-called impacts against its real benefits? Before they actually undertake the study? Such a biased approach makes me think that this study is in fact requested or, at least, strongly influenced by the GSMA, which is a strong opponent to any kind of surcharge on international incoming calls. The so-called tax on incoming calls is actually a new funding mechanism for development, similar to the tax on international financial transactions. It addresses the problem of North-South trade imbalance in the telecom sector, where foreign carriers make profit margins of up to 3000% on the African destinations (including countries of the ECOWAS region). The policy establishing this so-called tax also provides for new regulatory tools to improve quality of service, reduce fraud, and protect the revenues of the local stakeholders (including the operators themselves). Bottom line: African countries desperately need new innovative funding mechanisms for their development. In Senegal, they recently abolished the tax on incoming calls just to find out that this decision (which was actually a campaign promise from the new President) created a big hole in the State’s budget. In Ghana, where the telecom sector is more vigorous and flourishing than ever, the regulation on international calls remains in force and continues to benefit both the operators and the State. Let’s hope the AfDB’s study will be balanced and reflect all the facts, not just the views of the GSMA members.
The option to Freely Communicate has during the last 100 years enabled necessary changes and thereby development – in all aspects:
Entrance of literacy
Entrance of democracy
Liberation of individuals
Global understanding
Free competition in business
Better living conditions
Better world
Telecom and Data Communications are a very important foundation for the development of every nation – development in all aspects.
The tearing down of the Berlin wall and the Arab spring revolution would not have been possible without the means of free communications. The existence of mobile phone systems available for the people was a necessity.
Depressing the options of communications would lead to less development and to keeping the people down in the misery.
Taxation may have two different purposes: 1) collect funding and 2) impede usage. Taxation on telecom and data communications means contradictive purposes. Of course, the state wants more money, but it should not want to depress the communications, since the government should know that the communications would grow even more important for the development of the country.
The World Bank has reported the impact of Broadband Communications on the GDP in emerging countries: 1.4% increase of the GDP per 10% penetration just by having Broadband Communications Services available for its people and businesses.
Thus, all states should support and not impede the options for communications. In the long run, this will give the state more income than the taxation, and the whole nation and its people will benefit from it.
Taxation cannot solve the unfair North-South trade imbalance in the telecom sector. Instead, we have a solution for that problem, which we are trying to implement in the ECOWAS region, but that is another issue.