The Tax Justice Coalition, a Civil Society Organization, has called for predictability in government’s tax policies, citing the recent reduction in the Communication Service Tax (CST) from nine (9) percent to five (5) percent as disruptive to business planning.
The CST also known as “talk tax”, was first introduced in 2008 at an ad valorem rate of six per cent, but got increased to nine percent in 2019, as part of efforts by the current government to develop the foundation for the creation of a viable technology ecosystem in the country.
But in an interview with Citi Business News, the Chairman of the Tax Justice Coalition, Vitus Azeem, described the recent reduction as a move to score political points.
“As a principle, we don’t support too much focus on consumer-based taxes like VAT and others. But we cannot also deny that government needs revenue for the development of the country, especially now with the COVID-19 pandemic. With the CST, I don’t think they needed to review it since people had gotten used to it. But for political reasons they have reduced it.”
“Now if another party comes in and decides they need it increased then you have a very unpredictable tax policy. It’s a situation that investors don’t find helpful, because they want some certainty with tax policies in the countries they want to invest in,” he added.
Telecoms chamber urges businesses to use CST reduction to enhance efficiency
Chief Executive Officer of the Ghana Chamber of Telecommunications, Kenneth Ashigbey, has stated that businesses can take advantage of the implementation of the reduced Communication Service Tax, CST, to cut down cost and be more efficient.
Government in the Mid-year budget review announced a reduction in the tax from 9% to 5% as part of measures to cushion consumers from the economic impact of the COVID-19 pandemic.
The tax reduction which is expected to take effect on the 15th of September, will see consumers enjoying a reduction in the cost of calls and data.
Speaking to Citi Business News, Chief Executive Officer of the Ghana Chamber of Telecommunications, Kenneth Ashigbey, said, “Now all of us are moving digital and all of that , the cost of doing business as far as connectivity is concerned will come down and the fact that government has reduced the tax burden on all of us as consumers is something that is good and we are only hoping that the people will use it to be able to turn their businesses around and then it will help in the recovery process for all of us”, he said.
“You know how hard COVID has hit all businesses, now that that cost component in terms of the connectivity will be lower we hope that businesses will use it to turn round their wheels of productivity so that we can be able to recover from the effects of the pandemic,” he added.
The Communication Service Tax was first introduced in 2008 at an ad valorem rate of six per cent. The tax is levied on charges payable by consumers for the use of communication services.
In 2018, the tax brought in a total of GHc420 million, representing a 27.7 per cent increase from the estimated GHc304 million accrued in 2017.
The amount generated from the levy was 4.56 per cent more than the projected GHc401.8 million in the 2018 mid-year budget.
However, government in the main budget for 2020 delivered in November 2019 amended the CST Act, increasing it from six percent to nine percent. It took effect from October 1, 2019.
This led to increased agitation among telco customers. But following a directive from the Ministry of Communications, the upfront talk tax deductions were ceased.
However, in the 2020 mid-year budget presentation, government said it will reduce the CST from 9% to 5%.