Taxes must not stifle businesses
At the just ended 3i Africa Summit in Accra, Chief Executive Officer (CEO) of MTN Ghana, Stephen Blewett, made a profound statement when he highlighted the impact of what he described as high taxes on the mobile industry and consequently urged policymakers to reconsider the levels of taxes in the sector.
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He held the view that taxes take about 30 per cent of the revenues in the industry and are a major barrier to critical infrastructure and other investments.
Mr Blewett argued that without the appropriate fiscal incentives, the funding needed to modernise and expand digital infrastructure into higher technologies such as the fifth generation (5G) which made services more affordable and accessible to mobile Internet would not materialise.
“We must not sacrifice long-term growth for short-term gains,” the MTN CEO added.
The Graphic Business shares in the observations made by the MTN boss particularly at a time when the government is also pushing hard its digitalisation agenda.
It must be made clear that, aside from the industry giant, many others in the industry are not returning much profits to be able to plough back into capital expenditure and be abreast of latest developments within the fastest-evolving industry.
To us, there is the need for the government to take a holistic view of the sector and not be misled by the profitability of one major player to impose taxes that suck away the very capital needed by the smaller players to expand and be abreast of global technology trends.
After examining the balance sheets of most of the players within the telecom industry, we realise that the companies are only able to allocate just a little for capital expenditure because the revenues are eaten away by the numerous taxes imposed on the companies in the technology space, hence their inability to execute their expansion plans, the manner they would have wished.
The Graphic Business strongly believes that if the contribution of the information and communications technology (ICT) sector to the country’s economic output increased gradually from GH¢4.4 billion in 2016 to GH¢21 billion in 2022 is anything to go by, then government must rethink its tax policy around the industry.
To put it in context, reports attributed to the growth of the sector, which is approximately four per cent of gross domestic product (GDP), are due to the introduction of initiatives such as mobile money interoperability, digitalisation of the passport office, port operations and tax filing processes all of which are dependent on mobile services including data.
It must be noted that the growth and the success story is hinged on effective mobile services and the improvement in technology by service providers.
While we tout the achievements made and the revenue accrued, we want to indicate that this is just the tip of the iceberg and what government rather needs to do is to help the sector to expand as much as it could and not suffocate it with higher taxes which will eventually lead to their stagnation.
At a time when unemployment has reached alarming levels with its attendant risks, it is time to make the industry financially flexible to enable it to grow to absorb the idle workforce.
The Graphic Business believes that where there is a lot of potential, exorbitant taxes must not be the means to grow government revenues at the expense of the growth of the sector.
In recent past, we are witnesses to the many companies that have packed bag and baggage to abandon the economy.
Against this background, we prevail on the government to take the call made by the MTN CEO seriously and take remedial measures to amend the tax structure before it’s too late.
While we acknowledge the dire and extremely precarious financial situation of government, we also trust that any decision around taxes must be well thought through and not hastily implemented because the consequences in the medium to long term might be too much on the economy to comprehend.