The Rwandan government proposed a 2 per cent increase on excise duty levied on airtime to 10 per cent in the 2014/2015 national budget up from the current 8 per cent. As the budget day draws near, telecoms have expressed their uneaseness over the proposal since it will counter efforts aimed at deepening access to telephone and internet services.
The move to increase levy will fetch the government Rwf2b in the next fiscal year if implemented but on the other hand it will strangle growth in the sector. This comes after the senior manager in charge of legal and corporate affairs at MTN, Peter Mugemangango categorized airtime as a luxury good hence having it as the main target by the proposed excise duty levy.
“It is unfortunate that the government thinks airtime is a luxury good…Communication is a basic necessity today; that’s why we are striving to make it affordable for all to promote economic growth. But these efforts will be in vain if the tax increase is not revised,” he said.
Telecoms have also said the move will make it hard to run business since the proposal will affect subscribers directly and will ultimately suffer the burden. With the Average Revenue per User (ARPU) standing at Rwf1,360 per month the telecommunications sector is already hurt the proposal only makes it worse.
Rwanda has the lowest ARPU in the region which means majority of the subscribers are low end whose capacity to spend on mobile value-added solutions is little.