Telcos to meet Finance Ministry over 4% talk tax cut

The Ghana Chamber of Telecommunication is expected to engage the Ministry of Finance after a reduction in Communication Service Tax.

Mobile Network Operators (MNO) have received some reprieve as the government slashed the tax from 9% to 5%.

Subscribers are eager for a reduction in tariffs but will have to wait a few days for a reaction as stakeholders discuss modalities for the new tax regime.

The Chief Executive Officer of the Ghana Chamber of Telecommunications, Kenneth Ashigbey, told theghanareport.com on Friday, July 24, that they would deliberate on the details with the government before their next line of action.

The Finance Minister Ken Ofori-Atta announced the CST reduction in the Mid-Year Budget, which was presented to Parliament on Thursday.

The aim is to ease the burden on subscribers as the public switch to non-contact communications in the era of COVID-19.

CST is a tax levied on charges for the use of communications services that are provided by electronic communications service providers.

CST is imposed under Section 1 of the Communications Service Tax Act 2008, (Act 754) and CST(Amendment) Act, 2013 (Act 864).

It is paid by consumers to the communications service providers, who in turn pay all CST collected to the Domestic Tax Revenue Division of the Ghana Revenue Authority on a monthly basis.

The Ghana Revenue Authority (GRA) is required under the law, to pay the CST collected into the Consolidated Fund.

The need to review CST was triggered by COVID-19 pandemic.

Health experts have advised social distancing to cut physical contact as a measure of halting the contagion that has killed 153 people, with 30,366 confirmed cases and 26,687 recoveries/discharges, according to the Ghana Health Service (GHS) update as of Friday, July 24.

Phone calls and internet use have soared not only in Ghana but across the globe, with government institutions, businesses, educational institutions and the entertainment industry, among others, switching to online platforms for operations.

The government has recognised the need for interventions for users even though telcos are one of the biggest gainers of the pandemic with skyrocketing profits.

In May, MTN, the biggest MNO in Ghana, 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 in 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%.

Mr Ofori-Atta had announced an increase from 6% to 9% during the presentation of the 2019 mid-year budget review to parliament.

The CST was increased in June and took effect on October 1, 2019.

The Ghana Chamber of Telecommunication subsequently issued a statement to explain that service providers were absorbing the CST when it was 6%, but they decided to pass it on to the consumer following the increase to 9%.

With CST coming into effect, it means for every GHC 1.00 worth of recharge purchased.

A 9% CST fee was charged, leaving GHC 0.93% for purchase of products and services.

This is expected to be reduced following the recent cuts.