In a report dubbed, ‘Surtax on International Incoming Traffic (SIIT) in Africa’, the GSMA found that the introduction of SIIT can lead to less revenue for mobile operators and governments and higher prices for consumers while in a second report, ‘Sub-Saharan Africa Universal Service Fund (USF) Study’, the GSMA found that most of the tax money is not doing what it promises.
According to Tom Phillips, Chief Regulatory Officer, GSMA, “Sub-Saharan Africa is the fastest-growing region globally, with 328 million unique mobile subscribers and an annual growth rate of 18 per cent over the last five years. However, with subscriber penetration of just 37 per cent, there is clearly still huge potential for greater growth ahead.
Phillips adds that beyond the adoption of basic voice services, the region is experiencing an uptake of mobile data but SIIT and USF levies which are not being effectively employed have a negative impact on the domestic mobile sector and other businesses in the region.
The findings of the Surtax on International Incoming Traffic (SIIT) are in line with a recent publication from the Organisation for Economic Co-operation and Development (OECD) that shows that imposing higher charges for the termination of international inbound traffic suppresses demand. Similar to the GSMA’s study, the OECD report concludes that those governments that impose higher termination charges do not see their revenues increase proportionately.
The report outlines SIIT has caused the price of terminating international incoming calls to increase by an average 97 per cent, with an increase of up to 247 per cent in Burundi. SIIT has already shown its potential to create economic losses to governments that impose it. Minus SIIT, firms could generate $86 million in revenues from June 2010 to March 2014 and governments could have gained an extra $27.5 million across the period.
For businesses SIIT creates significant extra costs to African businesses that trade with, and therefore call, businesses in countries where the SIIT has been imposed, negatively affecting regional integration. Evidence from mobile operators indicates that nearly 40 per cent of all international incoming traffic is from countries in the region, and in some countries, such as Tanzania, over 50 per cent of calls originate within Africa.
The Sub-Saharan Africa Universal Service Fund Study finds that USFs in the region do not appear to be the most appropriate mechanism for providing universal access and service, and to furthering social and economic improvement in a proactive, cost-effective and transparent manner.
The report found significant deficiencies in fund structure, management and operation throughout the SSA region and the inactive funds ought to be disbanded and returning the remaining monies to the operators. License obligations, are often more effective than USFs according to the report.
“Mobile is an important contributor to the economy of Sub-Saharan Africa, accounting for more than six per cent of the region’s GDP, more than any other comparable region globally,” continued Phillips. “As our research has shown, taxation as a proportion of the total cost of mobile ownership in the region is also higher than the global average, a factor that makes mobile services less affordable for end users. The SIIT is clearly being used as an opportunistic short-term revenue tool by some governments and, in reality, USFs have become an unnecessary levy on the telecommunications industry. We strongly feel that eliminating harmful mobile-specific taxation would benefit consumers, businesses and governments by encouraging the take-up of new mobile services, improving productivity and boosting GDP and overall tax revenues in the longer term.”