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Africa to pay $71 bln mobile tax

Africa to pay $71 bln mobile tax

JOHANNESBURG, May 29 (Reuters) – Taxes are strangling the growth of the mobile phone industry in sub-Saharan Africa, with most mobile operators expected to pay $71 billion in tax by 2012, the GSM Association (GSMA) said on Thursday.
The association said in a report that this figure could be higher if governments removed luxury tax on mobile phones and services, and replaced the luxury tax with other taxes, which would spur the sector’s growth and result in more tax revenue.
“These taxes are holding back mobile adoption in Africa, curbing economic growth and, ironically, are actually lowering the total revenues collected by governments,” said Gabriel Solomon, Senior Vice President at the GSMA, the global trade body for the mobile industry.
“Mobile consumers in Africa face some of the highest tax rates in the world which hit poorer members of society hardest.”
GSMA said governments need to urgently review luxury taxes and this would enable millions of people to connect and communicate on mobile networks.
The removal of the taxes would enable governments to receive incrementally higher tax returns as industry growth boosts total VAT (Value Added Tax) receipts.
GSMA, which is the global trade body for the mobile industry representing more than 750 GSM mobile phone operators across 28 countries, said Sub-Saharan Africa, which is dominated by South Africa’s MTN Group, would have added 43 million people as new subscribers if mobile specific taxes were removed 2007.
By 2012, an increase in tax receipts of 30 percent would be recorded by Chad, 20 percent by Ghana, and 15 percent by Cameroon and Nigeria, compared with a global average of 17.5 percent.
Eight governments in sub-Saharan Africa levy luxury taxes on airtime, handsets and more than 25 governments have slapped the tax on equipment.
It estimates that every dollar the mobile phone industry invests in Africa generates an average of $80 cents in taxes.

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