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Cost of telecom services to rise, Telcos Warn
Posted on: 10-Jul-2013        
Players in the mobile telephony services industry in the country have warned that the cost of telecom services could rise if Parliament goes ahead to pass the Communication Service Tax (CST) Amendment Bill currently before the House.

The bill imposes a six per cent tax on interconnection, in addition to the existing surcharge of six cents per minute, which the government collects on international calls.

According to the Ghana Chamber of Telecommunications, the umbrella body of all the telecom players in the country, “already mobile network operators pay to the government 15 per cent VAT and NHIL on incoming international calls”.

Besides, the chamber said the Ministry of Finance is considering a further five per cent stabilisation levy on telecommunication services.

CST or Talk Tax was introduced as a Consumption Tax in 2008, to raise revenues for the government from subscribers by taxing them six per cent on the value of services used. In practice, however, network operators absorb this tax because of competition.

The chamber said the telecom industry was the only sector that had maintained almost zero inflation in the Ghanaian economy, consistently for more than 36 months, in spite of rising inflation in other sectors.

Against this background, it reiterated that: “If Parliament passes the CST Amendment Bill, it would lead to a substantial increase in the cost of telecommunication services if operators pass on the cost to consumers.”

“On the other hand, if mobile operators absorb the new taxes, it would make it difficult for them to justify the large investments required to expand infrastructure to meet the fast-growing demand for telecom services, particularly data,” the Chamber added.

History of telecom tarrifs

The imposition of extra taxes on telecom services in the country began in 2008, when the then government under the New Patriotic party (NPP) insisted on imposing a six per cent tax on communications services.

The government then argued that the tax was intended as an excise tax to raise additional revenue from communications services rendered by mobile operators to their customers and to each other when dealing with calls from customers.

The National Democratic Congress (NDC) then in opposition, argued against the tax insisting that it amounted to over taxation.

In spite of the reservations raised, the NPP went ahead to pass the bill into law to have what many described at the time as the ‘Talk Tax’.

With the baton of governance changing, the NDC is pushing for an additional tax after they vehemently opposed the initial one brought up by the NPP.

It has become the case that the NPP which found solace in that tax is now strongly opposed to the imposition of new taxes by the NDC.

State of bill

As of the close of Parliament last Friday, the bill had been suspended, and it is not clear whether it will be reintroduced after the huge public outcry against the tax they described as a desperate attempt by the government to find any easy target to milk dry without considering the implications on the telcos as far as the provision of infrastructure is concerned.