The government has decided to lower its expectations regarding expected proceeds from the telecommunication service tax (CST) after a poor performance in the first three quarters of the year.

According to the government, this contributed significantly to the Non-Oil tax revenue component missing its target in the first nine months of the year.

The government was able to collect GH¢344,249,096 as CST in the first 9 months of the year, lower than the target of GH¢405,940,742 for the period. The deviation of GH¢61, 691,646 means government missed its CST target by 15.2 percent during the period.

According to Finance Minister, Ken Ofori-Atta, the lower than anticipated collections from the Communication Service Tax during the period, was “due mainly to relatively lower usage of data as more physical meetings are held”.

Due to this performance, the government now expects this tax handle to rope in a total amount of GH¢576,635,563 in the 2021 fiscal year, thus, between January and December 2021, lower than the revised target of GH¢607,670,000 in the mid-year budget statement.

Impacts on Non-Oil Tax Revenue

The shortfalls in the CST and other tax handles such as Corporate Income Tax, Personal Income Tax, Mineral Royalties, Domestic Excise Duty, weighed heavily on Non-Oil Tax Revenue between January and September 2021, which missed the target by 7.8 percent. This is because government collected an amount of GH¢34,889 million in the first three quarters against the revised target of GH¢37,856 million.

In 2022, government is targeting a total amount of GH¢651,739,818 from the CST. This means the government expects this tax handle to pick up as the economy recovers and the use of digital services increase.

The Communication Service Tax (CST) is one levied on charges for the use of communications services that are provided by electronic communications service providers.

It is paid by consumers to the communications service providers, who in turn pay all CST collected to the Domestic Tax Revenue Division of the Ghana Revenue Authority on a monthly basis. The GRA is required under the law, to pay the CST collected into the Consolidated Fund.

Reduction in CST rate

Communication Service Tax Act 2008, (Act 754) was amended in 2013 under the CST Amendment Act, 2013 (Act 864). However, in one of his regular COVID-19 updates (number 14) on July 26, 2020, President Akufo Addo announced the reduction of the CST rate as an additional measure to alleviate the hardships caused by the pandemic.

Consequently, the Parliament of Ghana, on 27th August 2020, passed the CST Amendment Act. The Act reduced the CST rate from 9% to 5%. The Act, however, set September 15, 2020 as the commencement date.

At least 20% of the Revenue generated from the CST is to be used by the government to finance the National Youth Employment Programme (NYEP) in particular and support the national development agenda of the country in general.

Notably, the introduction of the CST coincided with the removal of import duty, VAT and National Health Insurance Levy (NHIL) on the importation and sale of telephone sets including mobile or cellular phones and satellite phones. This has the effect of reducing the cost of telephone sets and generally mitigating the tax burden that may result from the introduction of the CST.