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Ghana’s telecom industry over taxed – Vodafone CEO

Yolanda Cuba - CEO of Vodafone Ghana
Yolanda Cuba - CEO of Vodafone Ghana

The CEO of Vodafone Ghana Madam Yolanda Cuba has expressed worry over the huge number of taxes being slapped on the telecom industry.

She believes the situation has contributed to the industry’s current woes.

”It is an industry that is quite heavily taxed. We are taxed on top line, about three or four taxes that are based on top line. So before you even minus your expenses, all on the top line, it actually goes off. The second thing is that you then actually get taxed on your bottom line like everyone else so that one is not an issue for me. You are in the country you are making profit from the country, you have to contribute to society and government in the country so for me there are issues around there that are not really an issue but there are specific taxes that are there that I do not think are necessarily useful”. She said.

Ghana’s telecom industry is one of many industries which is almost on its knees as cost of operations, the cedi’s instability and depreciation, plus unreliable power and limited infrastructure among others continue to have a toll on its performance.

Heavily taxed industry?

It is unclear how much Vodafone spent on taxes for 2016, but its closest rival MTN, which is the biggest telecom operator in Ghana, in 2016 paid government a whopping 1.1 billion cedis in taxes and fees alone.

Of this, 713 million cedis went to the Ghana Revenue Authority (GRA), 51.8 million cedis went to the National Communications Authority (NCA)/ GIFEC, while 258 million cedis went to the NCA for the 4G, LTE and 85 million cedis to SIIT.

Speaking to the Head of Citi Business News Desk, Vivian Kai Lokko in an exclusive interview on developments in the telecom industry, Yolanda Cuba who is also the Chairperson of the Ghana Chamber of Telecommunications said, government must abolish taxes such as the stabilization levy.

”The stabilization tax which is the bottom line tax is one of the taxes which was meant to serve a particular purpose. It was for a specific purpose and that purpose has come and gone it should go away”. She said.

Government on July 15, 2013 introduced the stabilization levy to help reduce Ghana’s growing deficit.

The Levy which imposes 5 percent pretax on profits of businesses has been heavily criticized as a disincentive to the growth of businesses in the country.

The categories of companies selected to pay this special tax include telecom service providers, banks, non-banking financial institutions, insurance companies, breweries, and shipping lines, among others.

According to Madam Yolanda Cuba the tax was expected to last for only six months but has gone beyond two years ”So if what you say today, as government, I’m going to keep this for six months and then keep if for two years, next time you introduce something, I will look at you with a bit of suspicion, where as in the beginning I was willing to engage on it and actually understand it is a short term issue to help the country. Now when you come with another tax it’s a bit of a problem”.

PWC report confirms industry is overtaxed

A study conducted by Price Waterhouse Coopers (PwC), a multinational consultancy firm, for the Ghana Chamber of Telecommunications (GCT) in 2015, revealed that the telecom industry is one of the most taxed sectors in Ghana.

Mobile operators are subject to 14 different taxes and regulatory fees, in addition to various one-off charges.

Mobile operators according to the report pay US$650 million in taxes each year, representing about 40% of total revenues in the sector.

The report further disclosed that telecom operators in the country paid a whopping amount of GHC1.05 billion in total taxes in 2014 alone to government and its agencies.

MTN Ghana in 2015 paid a whopping 675.6 million cedis in taxes and about 605 million cedis in 2014.

Of this amount, 53 million cedis went into the stabilization levy, 16 million to Pay As You Earn (PAYE) tax and 29 million for withholding tax.

MTN in 2015 alone also paid the National Communications Authority (NCA) the regulator of the telecom industry 43.7 million cedis in regulatory fees.

The sector is also excluded from tax exemptions granted to various other sectors.

The Ghana Revenue Authority (GRA) however says the industry is not over taxed.

The Deputy Commissioner in charge of policy programs at GRA, Edward Gyamerah early last year told Citi Business News that ‘I do not understand those who say that we are over taxing the telecom sector in the country. I say so because very little has changed in terms of the tax regime since 2007. The telecommunication companies pay 25% corporate income tax and this has not changed since 2007 and virtually all the other taxes have remained the same over the years. I therefore find it difficult to agree with anyone who says that those in the telecoms sector are paying too much in terms of taxes’.

By:  Vivian Kai Lokko/citibusinessnews.com/Ghana

Ghana Business News