'Airtime tax will generate ¢1 trillion'

December 6, 2007 (Front page)

Story: Mabel Aku Baneseh

THE Ministry of Finance and Economic Planning has denied claims by telecommunication operators in the country that the proposed tax on mobile phone talk time can derail the national economy in the long term.
It said, on the contrary, the proposed tax would generate an annual revenue of GH¢100 million (¢1 trillion) for the state for development projects.
Currently, the state gets less than one per cent of the projected revenue of GH¢100 million from taxes on mobile phones.
Reacting to claims by telecommunications operators that the tax would rather inflict enormous distress on service providers, subscribers and the government, the ministry said the only losers in the new proposal would be the smugglers of cellular phones into the country.
In an interview with the Daily Graphic, the Director of Budget at the Ministry of Finance and Economic Planning, Mr Kwabena Adjei-Mensah, said about 95 per cent of cellular phones brought into the country this year were smuggled, leading to the loss of billions of cedis in revenue to the state.
“For instance, the revenue generated on cellular phone tax by the Customs, Excise and Preventive Service (CEPS) was $5 million, which was less than one per cent of what the government should have generated,” he said.
He assured cellular phone users that the introduction of the new system where they would be required to pay one pesewa per minute would result in a drastic reduction in cellular phone prices, as well as a reduction in the prices on talk time.
He explained that cellular phone importers were initially required to pay 10 per cent duty, 15 per cent VAT, five per cent ECOWAS levy, handling charges, among others.
That system, he said, had been scrapped because smugglers paid nothing to the government but in the long run succeeded in selling cellular phones at very high prices to users.
Mr Adjei-Mensah said money accruing from the proposed talk tax would go into the National Youth Employment Programme (NYEP), the capitation grant, free screening for cancers related to cellular phone use and screening for breast and prostate cancers.
He further stated that users of cellular phones stood to benefit from the proposed talk tax because cellular phones would be far cheaper than they were now, adding, “We are not only talking about tax but also how to develop mobile phone handsets in Ghana.”
“Mobile phone use will triple in the next two years and that will generate more revenue, more market and more employment for the government and Ghanaians, while prices in airtime will reduce drastically. Competition will be keener and the only loser is the smuggler,” Mr Adjei-Mensah pointed out.
He said empirical studies in Pakistan revealed that the government removed import duties and tax on mobile phones in 2005 and that resulted in the increase in the use of mobile phones from five million in 2004, 15 million in 2005 and 55 million in 2007.
That, Mr Adjei-Mensah stated, was an indication that mobile phone use would triple in the next couple of years and it was, therefore, important that the government put the necessary measures in place to ensure that all players in the telecommunications sector benefited.