Mobile taxation continues to be a major issue impacting mobile penetration across East Africa. Despite widespread investment from the mobile operator community, fierce price competition and market liberalisation making mobile more accessible, subscriber take-up in the region continues to lag behind the rest of the world.
Mobile subscribers across East Africa are taxed at some of the highest levels world-wide. Kenya, Uganda and Tanzania impose mobile-specific taxes which when added to VAT can result in their respective consumers facing taxes as high as 30% in Uganda and Tanzania, and 27% in Kenya, considerably the highest rates in Africa (and the among the highest across the world as a whole).
The GSM Association, the global trade association representing the global mobile operator community, is calling for the harmonisation of these mobile specific taxes across these East African countries to 3% to help increase further widespread mobile penetration. Harmonising taxes at 3% across Kenya, Uganda and Tanzania and increasing penetration will result in an overall increase in Government tax revenue (a graph is available to support this. In conjunction with the recent submarine fibre-optic cable construction to East Africa getting under way, the region has the opportunity to stimulate business growth internally.
According to a newly published Deloitte report commissioned by the GSMA, such taxes negatively impact the affordability of mobile services to some of the poorer communities across East Africa. The report reveals that the increase in mobile penetration as a result of harmonising mobile specific taxes at 3% would result in an increase in Government tax revenue and will extend the mobile franchise to all sectors of society.
The GSMA believes that the mobile device is no longer a luxury for African subscribers: it is now a fundamental basic need and regional taxation needs to lower barriers preventing more wide scale adoption.
"East African mobile consumers pay the highest amounts of tax worldwide," said Gabriel Solomon Senior Vice-President at the GSMA. "This report by Deloitte shows that removing air time excise duty will not only boost the regions' GDP but also increase the total amount of tax generated by the industry. We call on governments to review their tax policy urgently."
Key Deloitte findings regarding East African mobile take-up concluded that mobile phones account for 95% of all telecoms connections across East Africa. This is highly topical as the GSMA estimates that the mobile industry contributed between 6% and 4.7% of GDP across Kenya, Uganda and Tanzania in 2008. What is more, a 10% increase in mobile penetration increases GDP by 1.2% in the long run across developing countries.
Mobile penetration across Kenya, Uganda and Tanzania is currently growing at above 40%, an encouraging sign when mobile penetration across Africa is lower than in any other global region. another source of encouragement is that mobile retail prices across East Africa have fallen by an average of 25% since 2006 despite operators facing an increase in operating costs. Operators have indicated that further cost reductions are highly unlikely unless there is a reduction in the overall cost base.