Telecoms industry players who are members of the Ghana Chamber of Telecommunications (GCT) paid a total of GHS6.07 billion in taxes, fees, levies and other payments to the government of Ghana in 2022.
A statement from GCT noted that the amount represents a significant increase of more than 50% over the GHS4.02 billion they paid in 2021.
It also represents 46.31% of the total revenue generated by industry players in 2022, which is very significant, but indicated a marginal drop from 47.69% in 2021.
This is contained in this year’s Mobile Industry Transparency Initiative Report also dubbed the telecom sector total tax report put together by GCT.
The annual report, based on data from members of GCT, including AT, MTN, Vodafone, ATC, Helios, Comsys, CSquared, Ericsson, and Huawei, aims to illustrate the industry’s societal and economic contributions to the country’s development.
At the launch of the report, Chief Executive Officer of the Chamber, Ing. Dr. Kenneth Ashigbey, explained that the industry’s contribution of GH¢ 6.07 billion constitutes approximately 8.02% of the government’s 2022 tax revenue of ¢75.71 billion, as outlined in the 2022 annual report of the Ghana Revenue Authority (GRA).
The study employed the Total Contribution methodology, encompassing both tax and non-tax contributions made by GCT members to the government.
Tax contribution breakdown
According to the report, Corporate Income Tax (CIT) jumped by 42.6% from GH¢892.4 million to GH¢1.27 billion, which represents 23.1% of the total payments for the year under review.
Value Added Tax (VAT) also surged 43.42% from GH¢643.6 million in 2021 to GH¢923 million in 2022, marking it the second most significant tax category for the industry after Corporate Income Tax (CIT).
Withholding Tax (WHT) also continued to grow in 2022 like it did in 2021 albeit at a slower rate of 11.27%. WHT rose from GH¢610.5 million in 2021 to approximately GH¢ 679.4 million in 2022.
“The continued rise in WHT can be attributed to escalating business costs and increased spending, impacting the overall industry value chain,” the statement said.
Per the report, proceeds from the Communications Service Tax (CST) saw some 26.7% growth from GH¢403.9 million in 2021 to GH¢511.6 million in 2022, and the rise of over a GH¢100 million is attributed to a significant pick-up in economic activity and the usage of telecommunication services.
The statement however noted that, CST, which is the only industry specific tax, continues to put a damper on the potential volume growth and affects the affordability of data and voice for subscribers.
Currently CST stands at 5%, after having gone through a roller coaster from 3%, to 6% then to 9% before being reduced out the blue.
For several years, industry players, particularly telcos said they absorbed the CST on behalf of customers because they argued that customers paid taxes at the point of purchasing airtime/data so burdening them with CST (a usage tax) is double taxation. But at some point, the telcos could not longer absorb due to growing operational cost. So, they passed it on to customers as the law required.
“We would continue to propose that the rate of CST should be reduced in the near term,” the statement from GCT said.
The report further stated that the levies, made up of the National Health Insurance Levy (NHIL), Ghana Education Trust Fund (GETFund) levy, and the COVID-19 levy, collectively contributed GH¢768 million in 2022 compared to GH¢584.4 million in 2021, indicating a growth of 31.4%.
Speaking of levies, Following the introduction of the Electronic Transfer Levy (E-Levy) in May 2022, which was a 1.5% tax on the transfer amount of electronic transactions, government managed to raise GH¢482.8 million out of the GH¢ 6.9 billion that was targeted. The reduction in the E-Levy rate to 1% has however resulted in some recovery in the volumes and values of transaction in the mobile money space.
But, according to the report, there is still the need for further revision in the e-levy rate to align it to government’s digital by default strategy.
“Our recommendation to the Ministry of Finance is to consider reducing the levy on transfer to 0.5% and introduce a 0.5% levy on cash-outs among other proposals,” the GCT said.
Pay as You Earn
The report also revealed a significant growth in the Pay as You Earn (PAYE) tax line, inching up from GH¢138 million in 2021 to GH¢175.2 million in 2022, marking a 26.9% increase. This demonstrates not only the growth in payments made to employees but also the growth in the numbers employed within an environment where unemployment is a critical national challenge.
“This is one of the reasons why the government should consider easing the fiscal burden on the industry to enable it further expand its employment capacity,” Dr. Ken Ashigbey stated.
Speaking of employment, the report noted that the industry employs directly over 2,600 persons and provides over 1.2 million indirect jobs, which includes over 505,000 active Mobile Money Agents.
“It is important to note that the more than half a million mobile money agents also employ on the average 3 persons to support their business,” Dr. Ashigbey said.
The industry also invested over GHS3 billion in Capital Expenditure up from GHS2.2 billion in 2021. The growth investment is due to both an actual increase and also because of a significant depreciation of the Cedi.
“All of these investments do not only expand the networks and improve the quality of service provided by the industry, but they also result in the creation of jobs for Ghanaians, that are not captured in the report. It is on the back of this that we need to consider a policy on accelerated depreciation for the telecommunications industry as well as see it as one of the critical industries that should benefit from tax waivers and holidays as captured in the 2024 budget policy presented by the Ministry of Finance,” Dr. Ken Ashigbey argued.
An industry still struggling under taxes
The GCT CEO emphasized the vital role of the telecommunications industry in socio-economic development and argued against taxing it as ‘sin’ industries like alcohol and tobacco.
“Despite contributing a significant 2.27% to the country’s Non-Oil GDP, the industry bears a disproportionate tax burden, contributing 7.28% of Government Tax Revenue. This inequitable differential militates against government’s effort to transform the nation’s economy,” he lamented.
According to him, elevated taxation levels have significantly impacted the industry, particularly concerning industry-specific taxes that distort the market and deter investments.
Weak Cedi impacts Import Duties
Import duty collections in 2022 saw a huge jump of 78.5% when compared to collections in 2021. This rise can be attributed to among other things the significant depreciation of the Ghana Cedi against its major trading partners in 2022. As highlighted in the previous edition of this report, there’s a pressing need to focus efforts on developing and implementing local solutions that alleviate pressure on the local currency. Additionally, we would propose that government considers some import duties and tax waivers on some critical telecommunications equipment that are very important for the country’s development. This should also include components for the provision of solar energy other than the panels that are currently exempt.
It is important that the industry is viewed as a pivotal force driving the development of other sectors including agriculture, education, health care, manufacturing, government, rather than to be considered as the cash-cow that is overly taxed