Higher mobile taxes trouble East African telecoms

High taxes charged on mobile airtime and import duty on mobile handsets dominated discussions at the East Africa Com meeting held in Nairobi last week.

Mobile phones can improve employment through innovation and education among young people, and import duty and value added tax on all mobile phones handsets should be abolished, said Dorothy Ooko, communications manager for Nokia East Africa.

A tax waiver on mobile phones would make access to mobile phones cheaper for citizens, enabling millions of youths to become entrepreneurs in their communities, added Ooko. These businesses will eventually reduce the level of unemployment and contribute to economic growth, she said.

“Laptops and PCs are zero (tax) rated in order to increase Internet penetration. Mobile phones are the laptops of the future in our continent and therefore require zero rating,” she added.

Kenya, Uganda and Tanzania should cut taxes on mobile phone airtime to encourage usage and help operators weather the economic crisis, said Vitalis Olunga, chairman of industry group GSM Africa.

Mobile phone airtime attracts a 26 per cent tax in Kenya, 30 per cent in Uganda and 25 per cent in Tanzania, which is high compared to other African countries. Mobile handsets importers are also required to pay import duty.

The call for the reduction is backed on the study by the GSM Association that found that a cut in mobile services taxes would lead to a reduction in tariffs, which would then boost usage of mobile services.

By helping to raise usage, governments would improve communications between businesses and their customers, fuelling economic development and lifting tax receipts from across the wider economy.

Ooko cited Ghana, where zero-rated mobile phones has led to phenomenal growth in the industry.

Research carried out by Nokia has indicated that for each 10 per cent increase in mobile usage, there was a 0.5 per cent growth in the gross domestic product of a country.

Com meeting participants also discussed challenges faced by small operators playing in the same telecom league with multinational corporations, and challenges faced in keeping Internet users happy with innovative products.

Julius Kinyua, head of business development at Flashcom, talked about the high cost of deployment and competition in the Kenyan market, which has made margins very thin.

“We are a small network supporting a niche market, focusing on a wide range of products and targeting 5 per cent of the telecoms market with voice, data and other value added services,” said Kinyua.

Technology is changing and requires innovation from companies that need to analyze customer needs in order to increase revenue, said Deng Malok, managing director of Bilpam Telecoms in South Sudan.

“The region needs to develop legislation governing data protection in accordance with evolving technology,” added Malok. “Companies need to know they can outsource and be given legal backing to sue in case of breaches.”

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