Ghana’s pay-as-you-go airtime tax could ring hollow for strategic investors

19 Nov 2007

Ghana’s Minister for Finance and Economic Planning, Mr Kwadwo Baah-Wiredu, announced last Friday that the government is abolishing import duty and import VAT on all mobile phones imported into the country in what it claims is a move to ‘introduce a more effective means of taxing mobile phone usage’. Instead, it plans to impose ‘a specific excise duty per minute of airtime use’, which will in effect tax every minute of airtime a mobile phone user spends on any calls made. The minister argues that such a move is needed to combat the rise in the number of mobile handsets being smuggled into the country, which he says costs the state in lost taxes. However, critics of the new scheme are concerned the pay-as-you-go airtime tax will only make it harder for the average Ghanaian to have access to telecoms services. A spokesman for one leading mobile operator told TeleGeography that the government’s move is in reality ‘an anti-development tax’, and is unfair given that: ‘Import duty is one time. Airtime tax is forever’.

The opposition minister for finance, Benjamin Kumbour, has also promised to resist the airtime call tax, saying: ‘The excise duty imposed on airtime will simply make it impossible for people to have fair access to the mobile telecommunication technology. This is retrogression on our international commitment … and we will fight it from the beginning to the end.’ Dr Kumbour added that the government should instead focus its efforts on dealing with tax evasion and find an alternative means of monitoring and collecting taxes on imported mobile phones ‘rather than imposing tax on the general population’.

Although no details have been published on the actual level of tax the government intends to set, the airtime tax initiative will be unwelcome news to Kuwaiti telecoms group Zain, which last month – through its Netherlands-based Celtel International unit – agreed to purchase a 75% stake in Ghana’s struggling second national operator (SNO) Western Telesystems (WESTEL) from the Ghanaian government for USD120 million. Given that part of WESTEL’s attraction to Zain is the former’s untapped national wireless and cellular services licence, it may now be surprised and dismayed at the state’s sudden announcement. The government may also find itself answering questions from would-be suitors for a majority stake in the national PTO Ghana Telecom (GT), from which the state hopes to generate USD500 million for the Treasury coffers. SingTel, France Telecom and Portugal Telecom are believed to be conducting due diligence for a 51% stake in the firm, although they may now be seeking assurances from the Ghanaian authorities given that the PTO’s ‘jewel in the crown’ is arguably its mobile arm GT-OneTouch.