Upgrade of the ICT Evidence Portal
The newsletter this week is on our recently upgraded ICT Evidence Portal and especially the Tax Impact Calculator. We’re really excited about the ICT Evidence Portal because it gives key information about the telecom sector in Africa quickly and accurately. Regulators can easily benchmark their country against any other country on the continent. Operators can see how they compare against competitors. Any stakeholder can see what the impact of an increase or decrease in excise duties is going to have on tax revenue and the broader economy.
There are four tabs within the portal:
- African Ranks – Ranks each country in Africa according to affordability and infrastructure;
- Country Portal – Provides more detail for each country for researchers that want a more in-depth understanding of the rankings;
- MNO Portal – Collects all the Annual Financial Statements data for operators on the continent and can be sorted by country; operator or revenues; and
- Tax Impact Calculator – a dynamic tool to assess the impact of a change in ICT sector excise duties.
Let’s look at Kenya as an example for the Tax Impact Calculator. Figure 1 compares a decrease and an increase in excise duties. Scenario 1 and 2 show a decrease of 10% and 15% respectively. Scenario 3 is an increase of 10% in excise duties.
A decrease of between 10% and 15% in excise duties will mean a reduction in tax revenues of between 7% and 11% but an increase in employment of between 200k and over 300k. The increase in employment is the result of lower broadband prices and therefore higher broadband penetration. In comparison, an increase of 10% in excise duties will only result in a 2% increase in tax revenues, but a reduction in employment of over 200k. From a cost/benefit perspective, policymakers must assess which scenario is better: a small increase in tax revenues at the expense of many thousands of lost job opportunities? Or the reduction in tax revenues, but with the benefit of much higher employment (and the associated longer-term benefits that this might bring about). It is this basic cost/benefit analysis that is sadly missing from initiatives to increase tax revenues across the continent and which this tool addresses.
Other news from around Africa
- Zimbabwe: The Government of Zimbabwe has contracted a British Virgin Islands company to provide “a revenue collection service through taxing qualifying companies”. This agreement apparently targets Alphabet (Google), Meta (Facebook) and YouTube. How this will actually be implemented in the absence of any taxation agreement between BVI and Zimbabwe is unclear.
- Uganda: The limit on cheque payments has been lowered in order to encourage electronic payments and especially mobile money.
- Ghana: The Government of Ghana has introduced an Electronic Levy (E-Levy) of 1.75% on all electronic transactions above US$16. The tax comes into effect on the 1st of February 2022.
- South Africa: The ongoing soap opera of spectrum auctions in South Africa! There are two parts to Telkom’s application to stop the spectrum auction scheduled for March 2022. The first is an interdict to stop all proceedings immediately and the second is an application to modify the terms of spectrum allocation. Telkom has offered to withdraw the first part if the second (how the spectrum will be allocated) will be reviewed by the Courts before March. This approach seems unlikely but shows that Telkom is willing to negotiate. Expect a flurry of activity in the next month from South Africa.