400 Million USD of Sub-Saharan Africa’s Universal Service Funds Have
Yet to be Dispersed; Surtax on International Incoming Traffic Found to
Distort Price Competition and Negatively Impact Businesses and Consumers
LONDON - Monday, September 1st 2014 [ME NewsWire]
(BUSINESS
WIRE)-- The GSMA today called upon governments in Sub-Saharan Africa
(SSA) to review their approach to the increasing tax burden imposed on
the mobile industry. The GSMA released two studies that explore various
aspects of mobile-specific taxation in Africa and show that this burden
is stifling economic growth in those countries that have introduced
mobile-specific taxation. The first report, ‘Surtax on International
Incoming Traffic (SIIT) in Africa’, examines the impact of SIIT in
Sub-Saharan Africa and concludes that the introduction of SIIT can lead
to less revenue for mobile operators and governments and higher prices
for consumers. A second report, ‘Sub-Saharan Africa Universal Service
Fund (USF) Study’, found that most of these funds are not succeeding in
delivering their stated goal of widening access to telecommunication
services and that alternative market-based solutions are more effective.
“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,”
said Tom Phillips, Chief Regulatory Officer, GSMA. “Beyond further
adoption of basic voice services, the region is starting to see an
explosion in the uptake of mobile data. However, a short-term focus by
some countries on generating revenue through increasing the SIIT,
combined with the continued imposition of USF levies despite accumulated
funds that are not being effectively employed, will clearly have a
negative impact on the domestic mobile sector and other businesses in
the region.”
Report Highlights Negative Economic Impact of SIIT in Africa
The
report Surtax on International Incoming Traffic (SIIT) in Africa
studies the effects of the SIIT in six countries in Sub-Saharan Africa
and on regional integration. The report’s findings are in line with a
recent publication from the Organisation for Economic Co-operation and
Development (OECD)1 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 the impact for consumers,
governments and businesses:
Consumers - SIIT effectively
fixes prices for international traffic termination and in these
countries where it is imposed, the 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;
Governments - SIIT has already shown its potential to create economic
losses to governments that impose it. The report estimates that, in the
absence of the SIIT, mobile operators could have terminated an extra 1.2
billion international minutes and generating $86 million in revenues
from June 2010 to March 2014, indicating that governments could have
gained an extra $27.5 million across the period had the SIIT not been
introduced; and
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.
USF Report Highlights Need For Alternative Methods to Achieve Universal Service
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.
Generally, the report found significant deficiencies in fund structure,
management and operation throughout the SSA region. The report concludes
that consideration must be given to disbanding inactive funds and
returning the remaining monies to the operators who paid the levies in
the first place and, where this is not feasible, gradually reducing the
levy collected for either inactive or low activity funds and gradually
phasing out the funds. The study found that alternative approaches to
achieving universal service, such as license obligations, are often more
effective than USFs.
Both reports have identified countries
within the region that have recognised the negative impact of both the
SIIT and USFs on trade and regional integration. The two studies
conclude that in light of these negative consequences, other governments
should re-consider the SIIT and USF and assess the specific impact on
their economies and on economic development for the region as a whole.
“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.”
Notes to Editors
OECD (2014), "International Traffic Termination", OECD Digital Economy Papers, No. 238, OECD Publishing 10.1787/5jz2m5mnlvkc-en.
The GSMA reports can be found at: www.gsma.com/publicpolicy/tax/research-and-resources
About the GSMA
The
GSMA represents the interests of mobile operators worldwide. Spanning
more than 220 countries, the GSMA unites nearly 800 of the world’s
mobile operators with 250 companies in the broader mobile ecosystem,
including handset and device makers, software companies, equipment
providers and Internet companies, as well as organisations in industry
sectors such as financial services, healthcare, media, transport and
utilities. The GSMA also produces industry-leading events such as Mobile
World Congress and Mobile Asia Expo.
For more information, please visit the GSMA corporate website at www.gsma.com. Follow the GSMA on Twitter: @GSMA.
Contacts
For the GSMA
Charlie Meredith-Hardy, +44 7917 298428
CMeredith-Hardy@webershandwick.com
Jill Hamilton, +27 826 588 831
jhamilton@webershandwick.com
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