The cost of telephone calls between African countries is likely to remain high and international call volumes will drop with the introduction of taxes, according to a report from the GSM Association.
Senegal, Ghana, Congo Brazaville and Gabon have introduced taxes on incoming international calls, leading to higher costs for users and reduced revenue and call volumes for mobile operators. The taxes are also likely to reduce foreign direct investments because the costs of operating businesses such as call centers will probably go up.
"The tax takes the form of an imposed fixed price that operators must charge for international inbound termination, of which the government takes a set amount," said the report, issued on the sidelines of the U.N. Internet Governance Forum in Nairobi. A private party measures international inbound minutes terminated by operators and bills them accordingly, it said.
While the taxes are different in the four countries, the affect on the operators has been the same. In Senegal, call prices rose by 50 percent. In Ghana, prices rose by 58 percent while inbound traffic fell by 12 percent in the six months after the tax was introduced. In Congo Brazaville, the price of inbound calls rose by 111 percent while the volume fell by 36 percent. In Gabon, prices rose by 82 percent when the tax was introduced in August 2011.
The report questioned the benefit of the tax on economies, given that half the money collected is shared with the third-party company that monitors the calls.
"The main objective of this taxation is to raise revenues for governments, in this case by taxing users calling from abroad into the country, however, the government transfers approximately 50 percent of the revenue from the tax to the external call monitoring party," the report said. "This leakage should be taken into account when assessing the effectiveness and net benefit of this tax."
The report projects that other African countries are likely to reciprocate by raising the cost of inbound calls. In Congo Brazaville, an operator reported that an operator in another African country raised call termination charges by 30 percent. while in Senegal, an operator reported that nine operators in other African countries raised rates by 23 to 80 percent, making the call costs very high.
The GSMA further noted that many operators are not making profits because the cost of other services and maintaining rural telecoms infrastructure is high.
In supporting its case to remove telecommunication taxes, the GSMA released another report that highlights the benefits that Kenya has gained since it zero-rated mobile handsets in June 2009. This year, the mobile communications industry will contribute US$300 million to the GDP and a further $100 million from intangible benefits to Kenyan consumers. The industry also employs 250,000 people in Kenya.
"Since June 2009 when the tax was removed, handset purchases have increased by more than 200 percent and penetration rates have increased substantially from 50 percent to 70 percent, this successful policy confirms that consumption taxes can have a significant impact on consumer behavior in Kenya," said the report.