Continuing Dialogues on balancing mobile sector taxation in Chad
The mobile sector is a key contributor to Chad’s economy. Mobile services connect over 4 million people in Chad. In 2015, mobile services generated market revenues of USD 300 million (XAF 117 billion), which corresponded to 2.7% of Chadian GDP. However, a number of barriers remain to connect the 8 million Chadians that still lack access to mobile services. Sector specific taxes and fees raise affordability barriers and affect the long term investment incentives. Following the initial discussion in the ICT Taxes & Policy workshop in N’Djamena in September 2016, the GSMA published a report ‘Digital Inclusion and Mobile Sector Taxation in Chad: Reforming Sector-Specific Taxes and Regulatory Fees to Drive Affordability and Investment’. This report examines the role of tax policy in stimulating mobile uptake, digital inclusion, infrastructure investment, employment and broader economic growth.
Addressing the barriers of mobile connectivity in Chad:
- Affordability is a concern for many Chadians, particularly for the poorest 20% of the population. The estimated cost of voice and SMS services amounts to 87% of average monthly income. The SIM activation fee alone represents around 2.5 times of daily income.
- Affordability is likely to be a major reason for low rates of broadband usage. Even for the highest 20% of earners, the cost of a typical mobile broadband package represents 9% of monthly income, higher than the 5% threshold set by the United Nations Broadband Commission.
- Mobile sector specific taxes contribute to raising the affordability barriers. In 2015, tax and regulatory fee payments made by the Chadian mobile operators equal to US$ 36 per subscriber, which represents around 4% of average annual income for average Chadians.
- Excessive tax burden also hinders operators’ incentive to invest, this may have negative long term effects particularly at a time when a lot more investment is required to roll-out and upgrade network infrastructure in Chad.
- The mobile sector as a whole paid around USD 143 million (XAF 85 billion) in taxes and regulatory fees in 2015, which represents approximately 48% of sector revenues.
- The mobile sector’s contribution to government tax revenues, including all tax and fee payments, is over four times its share of GDP. Despite only accounting for less than 3% of GDP, the sector contributed 12% of total government tax revenues in 2015.
These key findings and the economic impacts of mobile taxation were presented at a mobile taxation workshop in N’Djamena on 23rd of November 2016. The event was attended by representatives from the ICT Ministry, ARCEP (regulator), ADETIC (ICT agency), and the Treasury. Despite different views on the tax policy, many attendees expressed that the GSMA analysis provided them with insights that they had not seen or thought about, for example, the tax payment as a proportion of total mobile revenues and the amount of mobile taxes as a proportion of average income. Government stakeholders found the economic impact analysis conducted by the GSMA particularly helpful to understand how raising sector specific taxes may have effects on wider economy. In general, the workshop was well received.
The draft Finance Bill in December 2016 proposed to eliminate some of the mobile sector specific fees and taxes, e.g. SIM activation fees and mobile call usage charges, further it introduced an 18% revenue tax on mobile operators’ monthly gross revenues. Given the currently high level of taxes paid by both mobile consumers and operators in Chad, the newly introduced revenue taxes would put even higher pressures on both affordability and investment incentives in the Chadian mobile sector, which backtracks from the vision to promote digital development in the country. Recognising the importance of contributing to general tax revenues, it is also believed a more balanced tax system could extend the benefit of mobile, support the government’s digital agendas and achieve social and economic development goal in Chad. Airtel and Millicom have agreed to continue dialogues of taxes and policy adjustment propositions with the government and relevant parties. The GSMA will continue supporting this initiative.
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