Telco firms in East Africa rattled by new taxes

July 9, 2013

The recently proposed taxes on mobile operators products in East African countries of Tanzania and Uganda has sent shockwaves among the operators in the region. The two governments finance ministers rolled out their intention to tax nascent mobile money transfer sector to plug in their national budgets holes. The proposals that resembles Kenyan government move earlier this year to tax the sector has sent jitters to telecommunication companies as it accentuated the taxation uncertainty that could stunt the industry from expanding amid the high demand for mobile money transfer products access. Some proponents have argued that telecom operators are guilty of enriching their shareholders by misusing their near monopoly of the unbanked population in the region but some experts I have spoken to confided to me that they see traditional banking players hands in the new proposal.The spontaneous growth of Mobile money transfer has no doubt shaken small and big boys in the banking industry in the region where statistics shows that number of people using mobile money banking services is double that of the traditional banking.

After analyzing the two governments proposals, I strongly believe that it will definitely affect the investment climate in a very negative way for the region’s future. Only fools will disagree that foreign investors will question the tax certainty of doing business in East Africa. Financial and tax experts I sought views from over the weekend unanimously agreed with other players in the industry who have repeatedly pointed out that taxing the mobile money services does more harm than good to the more than 50 million plus East Africans using the service. Industry players are concerned that the moves by cash strapped finance ministries would act as a precedent to tax similar products against operators and ISP innovations in the future. I also think that the proposals could make investors, particularly the new ones, think twice about putting their money in the telecom industry. It could also form a basis for any government to overtax telecommunication operators and ISPs. Am one of those who feel the proposals threatens to thwart efforts by the industry players to pump up mobile money transfer services usage in the East African region and it’s a very bleak move for the industry.

Contador Harrison