No new taxes in telecom sector despite boom-Finance Minister

 

The government will not introduce any new tax in the digital space, although the country’s telecommunication industry has seen a boom during covid-19 scourge.

Ahead of his July 23 appearance before Parliament to review the country’s income and expenditure in the 2020 supplementary budget, the Minister of Finance, Ken Ofori-Atta said the government does not intend to hike taxes in the telecommunication sector.

“You don’t kick a man when he is down, so it can’t be an area that we are going to increase any taxes. Compliance will certainly continue, but there will be forbearance to give people time.

“We need to look at the digital space as to what we may want to do to encourage a more usage or reduce the cost of usage,” Mr Ofori-Atta said on PM Express on Joy News.

With covid-19 throwing the 2020 budget out of gear, while the government’s revenue targets dip by more than GH₵14 billion, the minister will be seeking Parliamentary approval for a revival plan but the sector Ken Ofori-Att said it does not include introducing new taxes.

When he appeared before Parliament in November last year, he projected to raise at least GH₵68.5 billon as domestic revenue for the public purse.

But four months after Ghana record its first covid-19 case, the minister is revising his notes as domestic revenue nose dive, with healthcare bill skyrocketing, while productivity slows down.

Coincidentally, the government increased the communication service tax from 6% to 9% during the mid-term budget review in July last year, amid public uproar.

The Minister in justifying the need for the increase said it was to create a viable technology ecosystem in the country.

Government proposes to increase the tax to nine percent to develop the foundation for the creation of a viable technology ecosystem in the country. This will comprise amongst others putting in systems to identify and combat cybercrime, protect users of information technology and combat money laundering and other financial crimes. The increase will not be earmarked, however, the sharing ratio will be adjusted in such a manner that the national youth employment programmes continue to receive the same proportions as they are currently receiving,” the minister said at the time.

The tax , which was introduced in 2008, is charged on the use of communication services in the country, including voice calls.

Millions of Ghanaians turned to telecommunication sector as companies to connect digitally, Businesses shut down to insulate their employees from contracting the disease.

Profits

Demand for internet data shot up, with telecommunication sector recording astronomical profits.

In May, MTN reported that it had recorded a profit after tax of about 350 million cedis for the first three months in 2020, representing a 62% growth over the 2019 figure of 215 million cedis.

For the first three months of 2020, MTN’s total revenue which comprises income accruing from both core activities and other services amounted to 1.44 billion cedis.

This represents about 21% growth compared to the 1.19 billion cedis recorded the same period in 2019.

Of the total revenue, the company’s core activities like voice and data services, accrued 1.42 billion cedis or 99%.

On the possibility of creaming taxes from a booming digital space, he said “taxes are not meant to be coercive. They are meant for you to pay your faire share to society that is growing. In some cases, you make an extraordinary profit that are agreed and taxed. In most cases, your profit grows, and the percentage that comes to me [Finance Ministry] is more.

He, however, noted that digitisation was the way to go as “even as you begin to digitise, you get a much more effective way of examining the taxes that you get from these companies.”

With Africa losing more than $70 billion to illicit flows through commercial transactions annually, the minister said an effective digitisation system would save the continent, that amount.

online education

As the coronavirus compel educational institutions to rethink the brick and mortar model, Mr Ofori-Atta said the government would consider investing in a robust online educational infrastructure that could accommodate the thousands of senior high school student who would graduate from school this year,  but would be confronted with limited space in the universities.

“This will make lifelong education easily accessible and cheaper. Some of our kids who were in school in America are now back home, and will be doing next year online from Ghana.

“So you begin to realise that a lot more people living in Ghana could get some of the best online education in the world, and even how our local universities will structure the pedagogy that will emerge.