The telecommunications sector is known for its economic expansion on the continent. Consequently, this expansion is of particular interest to African governments, which are seeking financing or looking for a new financial opportunity. However, although the sector is expanding, it faces specific challenges, such as the burden of paying taxes. For this reason, the GSMA advocates for a reduction or overhaul of the taxation imposed on the sector in Africa.
Tax Reduction to Reduce Internet Cost by 13% by 2025
The economic weight of the telecommunications sector in Africa is significantly affected by the payment of various taxes, despite sustained economic growth in the industry on the continent. The Global Mobile Operators Association (GSMA) is therefore working to reduce the various taxes they levy. Specifically, it points out that this reduction could benefit consumers, notably with a 13% reduction in the cost of mobile internet each year until 2028.
Furthermore, telecommunications service providers are required to pay at least three main taxes, divided into several categories:
- Operator taxes and fees (license fees, income tax, universal service fund tax, etc.)
- Consumption taxes (call tax, electronic transaction tax, etc.)
- Phone taxes and import duties
A reduction that will benefit several telecommunications sectors
However, the tax relief granted to telecom service providers will not only benefit consumers, but also the smartphone production chain, with a reduction impact of 7%. Indeed, the lower cost of internet and smartphones will contribute to the profitability of marketing investments in rural areas. This reduction would also lead to other benefits.
These benefits include the implementation of mobile broadband, an increase in demand that drives investment, as well as a 6% year-over-year growth in the number of mobile internet users in Africa. Finally, a boost is given to the mobile penetration rate, reaching 44%, and the mobile internet penetration rate, reaching 27% by 2024.
Examples of Fiscal Policies
Some countries, such as Nigeria, are considering reinstating suspended taxes, such as the 5% excise duty on telecom services, to strengthen their financial position. Other countries, such as Cameroon and Côte d’Ivoire, have introduced new taxes, which have drawn criticism regarding their impact on digital transformation.
In summary, reducing taxes in the telecoms sector in Africa could promote internet access and stimulate digital development. However, it requires a delicate balance between the needs of governments, operators, and consumers.
However, an economically viable solution for both parties must be found, as these taxes have a significant impact on the continent’s economic development. As the sector continues to expand, telecommunications in Africa also contribute to the transformation of the mobile ecosystem’s GDP.
Consequently, two years ago, the sector’s contribution to GDP was 7%, equivalent to USD 140 billion in 2023. This contribution could rise to USD 170 billion by 2030.
