Transparency: Ghana Chamber of Telecoms takes the lead

By Nana Appiah Acquaye, Accra, Ghana

To lay bare the true state of financial contributions made by telecommunication companies operating in the country to the government through taxes, levies, etc, the Ghana Chamber of Telecommunication has released a study conducted by reputable audit firm PwC, which indicates the  revenues generated for the government by telecoms operators in the country.

According to the study officially launched in Accra, the total taxes borne and total taxes collected by network providers on behalf of the government of Ghana was GHC1.04 billion and GHC1.05 billion in 2013 and 2014 respectively, indicating  a  6.9% and 5.4% of the Government of Ghana’s tax revenue for 2013 and 2014 respectively.

The Chief Executive Officer of the Chamber, Kwaku Sakyi Addo, revealed that even though such a substantial amount of revenue is collected on behalf of government , little or no appreciations is shown for their efforts. He believes that it’s about time the government acknowledged the enormous efforts that have been put in place to mobilize revenue for the government.

“This should influence policy initiatives and regulatory responses which ensure that a healthy investment climate is maintained in the Ghanaian market to promote digital inclusion and a connected society," he added.

The study covered other regulatory fees paid to government agencies, discretionary contributions like corporate social responsibility, employment trends and capital investments made by the members of the Ghana Chamber Telecom. It also gathered information about the industry’s tax contribution and overall enabling impact on the economy.

Five members of the Ghana Chamber of Telecom were considered for the study. The Total Tax Contribution methodology measures all taxes borne and collected by the members of GCT. Total taxes borne are taxes which are a cost to the members when paid and affects their financial profitability. Total taxes collected are taxes collected and administered on behalf of the government, which are not a direct cost to the members but are generated as a result of the member’s business activities and the activity of collection has cash flow implications to the members. The mobile telecommunications sector has been one of the most vibrant sectors of the Ghana economy since its liberalization in the early nineties.

Product taxes and regulatory fees paid to regulatory agencies together constitute the largest type of tax payment. The product taxes mainly comprise the statutory 1% net revenue contribution to National Communications Authority (“NCA”) and Ghana Investment Fund for Electronic Communications (“GIFEC”). The product taxes and regulatory fees exceeded the usual visible profit taxes such as corporate income tax.

The study continues to show an increase in product taxes collected such as Communication Services Tax (CST) and Value-Added Tax (VAT). CST is an industry specific tax which was introduced in 2008 to raise revenue from the communications services rendered by telecom operators to their customers. The CST paid by members increased by over 57% from 2012 to 2014. The increase relates to the growth of the telecoms sector over the period as well as changes in underlying laws governing the collection of taxes on voice and data service. 

The members of GCT have been engaged in various Corporate Social Responsibility activities (“CSR”) mainly in the education sector, health sector and economic development areas as part of their contributions to the society at large. In perspective, the CSR contributions represented 5.7% to 1.2% of the average taxes collected for government between 2011 and 2014.  Overall, there was a decline in capital expenditure by an average of 43% between 2011 and 2013.

The decline may be attributed to changes in legislation that required telecommunications operators to divest their tower portfolios and the investment life cycles of the industry that requires high level of investment in capital in early years. However, there was an increase in operating expenditures by 63% between 2012 and 2013. The telecommunication operators are expected to incur additional costs of renting towers.  

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