The Ghana Chamber of Telecommunications (GCT) has disclosed that its eight participating companies made a total tax contribution of over GH¢3.6 billion in the 2020 calendar year.
According to the GCT, this represents total taxes borne and collected as well as other payments and remittances it made to the central government and other allied agencies.
Dr. Ing. Kenneth Ashigbey, Chief Executive of the GCT, revealed this at the launch of the 2020 tax contribution report in Accra.
“…The eight participating companies in 2020 made a total tax contribution of over ¢3.6 billion in the 2020 calendar year”.
Dr. Ing. Kenneth Ashigbey
A breakdown of the taxes into the various components show that Corporate Income Tax (CIT) remains the largest tax type of the industry. This tax relates to taxes borne by the members of the Chamber. In monetary terms, the industry contributed GH¢976 million in CIT last year. This, according to Dr. Ashigbey, represents approximately 26.8% of the Total Tax Contribution (TTC). Meanwhile, he reminded his audience that the general corporate income tax rate for the industry is 25%.
Other major tax line
Furthermore, the study finds Value Added Tax (VAT) as the second tax line of the industry. The Chief Executive indicated that VAT contributed about 15.1% of the TTC last year with a monetary value of over GH¢550 million.
The Chamber highlighted that this tax line is a pass-through cost which can be passed on to final consumers. However, it places an administrative obligation on the members of the Chamber to correctly administer, collect and pay to government. In addition to this, the Chamber argued that its members also incur some expenses from the input VAT within their business as consumers.
Additionally, another major contributory tax line from the perspective of the GCT is the Communications Service Tax (CST). According to the Chamber, this accounted for 14.5% of the TTC last year with a monetary value of over GH¢525 million.
The CST is an industry specific tax introduced in 2008 to raise additional revenue from communications services that telecom operators render to their customers. However, the government made an amendment to the law in 2013 to include interconnect services. The government then reduced the talk tax rate to 5% in 2020.
Mr. Derek Laryea, Head of Research & Communications at the GCT, contributing to the tax conversation, intimated that the reduction of the CST rate from 9% to 5% resulted in an improvement in tax revenues. He argued that telecom services are elastic and so a marginal increase in the cost will result in a more reduction in the consumption of the product. As such, he urged the government to keep the CST at a lower rate to boost consumption that will also increase revenues.
Other taxes and fees
Meanwhile, other product taxes, regulatory fees and the Universal Service Fund (USF) amounted to GH¢138 million last year. Dr. Ashigbey highlighted that Mobile financial services (MFS) for the first time contributed a whopping 5.91% tax contribution to the TTC. The amount raised from the MFS last year was about ¢215 million.
However, the Chamber, believes that the government had estimated its contribution to total tax revenue in 2020.
“The 2020 TTC of the mobile industry forms approximately 8.5% of the government of Ghana’s tax revenue (Ministry of Finance, 2020 budget statement) for 2020. This contribution, analysts argue rather conservative and does not take into consideration the inputs of other industry players in the study; nevertheless, demonstrates the importance of the mobile industry to the government’s tax revenue and national GDP and economic growth”.
Dr. Ing. Kenneth Ashigbey
According to Dr. Ashigbey, the industry’s tax contributions over the last three years have shown continuous average annual growth of over 28%.
“From GHS1.74bn in 2017, GHS2.2bn in 2018, and GHC3.2bn in 2019. There has, however, been a continuous decrease observed on certain lines such as import duties, SIIT which creates a need for further analysis”.
Dr. Ing. Kenneth Ashigbey
Contribution of the Telecom Industry
Dr. Ashigbey further underscored the importance of the mobile sector and its contribution to Ghana’s economic and fiscal stability. This is mainly due to its own contribution to the economy as well as the contribution of the associated ecosystem of industries. According to him, the sector continues to support and catalyze other sectors such as banking, media, advertising, and agriculture. Others include health, education, creative arts as well as facilitating social and familial communication and stability.
The Ghana Chamber of Telecommunications (GCT), is an industry association, representing the interests of telecommunication operators and infrastructure companies. This includes AirtelTigo, MTN, Vodafone, American Tower Company, Helios Towers, Huawei, Comsys and C-Squared. Its members offer services ranging from fixed and mobile telecommunications to mobile data solutions, Internet services and mobile financial services.
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