17 August 2017

Tanzania: Cellphones Now Overtake Beer in Tax Contribution

Photo: The Citizen
A National Bureau of Statistics report shows that since 2004/05 beer was the largest contributor of revenue from excise but things changed in 2013/14.

Dar es Salaam — It is official: mobile phones are now leading generators of excise tax, overtaking beer.

A National Bureau of Statistics (NBS) report shows that since 2004/05 beer was the largest contributor of revenue from excise but things changed in 2013/14 when mobile phones took the lead.

This came after the tremendous growth of mobile phone usage in the country that has been prompted by ever increasing demand in communication especially in voice, internet and mobile money services.

Tax Statistics Report 2015/16 shows that since in 2013/14 mobile phones have been accounting for more than 28 per cent of total domestic excise tax, leaving beer at an average of 25 per cent.

The report reveals that the revenue from the electronic gadgets has grown tremendously by more than 25 times from Sh9.7 billion in 2004/05 to Sh246.6 billion in 2015/16. Beer domestic excise duty has risen from Sh52.1 billion to Sh216.6 billion in 2015/16.

Analysts say this shows the contribution of mobile phones to the national economic growth can be higher if excise duty is reduced to increase communication.

"Tanzania has the highest excise rate in the East African Community. It's 17 per cent while Rwanda's is eight per cent and Kenya's is 10-12 per cent," said Auditax International expert Shabu Maurus.

He said telecom companies had been urging the government to reduce the rate to make communication inexpensive, to no avail. Mr Maurus suggests that it is important for the government and mobile phone companies to agree on win-win model for rural areas to enjoy reliable communication.

"Most studies done in the past including that of 2015 by GSMA -- a trade body that represents the interests of mobile operators worldwide -- shows that a reduction in excise tax rates will increase communication, which will in turn, boost the government revenues."

However, the taxman says it is the growth in the use of communication services that made mobile phones raise their share of revenue from domestic excise taxes.

"People nowadays use mobile phones not only for voice call alone but for more uses such as mobile money services and social networks like WhatsApp," said the Tanzania Revenue Authority (TRA) director of information and tax education, Mr Richard Kayombo. "That's why mobile phones have contributed more than other products in the tax category." He said excise tax rates in telecommunication sector "are the same across the region".

In 2013/14 financial year the government introduced a 14.5 percent excise duty in all mobile phones instead of taxing airtime alone. Excise duty of Sh1,000 was slapped on each Sim card, but the public protested. The 2.5 per cent of the revenue from mobile phones excise duty was to fund the education sector.

The government then increased excise tax to wired and wireless telephones. Unlike in mobile phones, beer excise tax has been increasing almost every financial year, sometimes adjusted to fit with inflation.

For example, the excise duty for all beer, except that from locally unmalted cereals jumped from Sh382 per litre in 2010/11 to Sh765 per litre this financial year.

According to the report, total revenue from total domestic excise revenue in 2015/16 was Sh868.6 billion almost two times of what was collected in 2011/12.

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