"HIGH taxes are choking creativity, blocking access to digital tools" captures the impact of Tanzania's 34 per cent tax burden on mobile devices, as noted in the GSMA Report 2021 and UNICEF's 2021 study, limiting smartphone ownership and digital access, especially in creative industries.
The Tanzania Communications Regulatory Authority (TCRA) Quarterly Report 2022 and Tanzania Investment Centre (TIC) Report 2021 also highlight infrastructure and affordability issues.
This article examines how taxation is hindering Tanzania's digital growth and explores potential solutions for inclusion.
Tax burden
In Tanzania, the GSMA report reveals that taxes and duties on mobile devices account for 34 per cent of the phone's price, meaning a phone priced at 250,000/- could rise to 450,000/- due to VAT (18 per cent), port duties and a railway development levy (RDL), along with additional costs like the SIM card levy and excise taxes, which further increase the cost of mobile services and limit smartphone ownership.
In contrast to Tanzania's high taxes on mobile devices, Kenya imposes a 16 per cent VAT and 10 per cent excise duty, Uganda applies an 18 per cent VAT and 12 per cent excise duty, while South Africa has a 15 per cent VAT and better mobile penetration due to its stronger economy and globally, India and the UK impose 18 per cent GST and 20 per cent VAT respectively, without the extra duties seen in Tanzania, making devices more affordable.
Mobile broadband coverage
Mobile broadband is expanding in Tanzania, with the government aiming for 80 per cent internet penetration by 2025, though only 46 per cent had access by 2020, while rural areas still lag in 3G and 4G coverage, similar to Kenya, which has seen rapid urban broadband growth but faces rural challenges and Nigeria, were over 50 per cent had mobile broadband by 2020, though rural coverage remains lower, while Mali has made progress in expanding 3G and 4G despite political instability; across these countries, the urban-rural gap persists, with ongoing efforts to improve access in underserved areas.
Affordability of mobile internet
Affordability is a major issue in the country, where a 2021 UNICEF study found that 75 per cent of people cited cost as the main barrier to smartphone ownership, with mobile data consuming 4.0 per cent of monthly income--higher than in many African countries, such as Kenya, where data costs 2.7 per cent of income but still burdens low-income households and South Africa, where citizens spend 7.0 per cent of their income on services, especially in rural areas, while Uganda has more affordable data but continues to face rural affordability challenges, highlighting ongoing barriers to digital access across Sub-Saharan Africa.
Urban-rural divide
Tanzania has a significant urban-rural divide in mobile internet, with rural areas lagging due to poor infrastructure and high costs.
By 2020, many rural Tanzanians were still disconnected. Kenya has reduced this gap through 4G expansion, though rural areas remain 60 per cent less likely to have access.
Nigeria faces similar disparities, with cities like Lagos enjoying 4G while rural areas rely on 2G or 3G.
In Mozambique, urban centers like Maputo have good access, but rural areas remain largely disconnected.
These gaps highlight the need for improving rural connectivity.
TCRA report
The TCRA October 2022 report highlights significant progress in Tanzania's communications sector, with mobile subscriptions reaching 56.2 million, internet users totaling 29.3 million (covering 46 per cent of the population), 4G coverage contributing to an 8.0 per cent rise in mobile broadband subscriptions, active SIM cards hitting 50.6 million and voice traffic reaching 72 billion minutes, yet challenges in rural connectivity and affordability persist, with future plans to expand broadband infrastructure for 80 per cent internet penetration by 2025 and introduce 5G technology to boost growth further.
UNICEF report
The UNICEF 2021 study, titled "Combatting the Costs of Exclusion", reveals that 75 per cent of respondents in low-and middle-income countries, including Tanzania, identified high smartphone costs as the main barrier to ownership, with 34 per cent of a phone's retail price in Tanzania being taxes and duties, making devices less affordable; globally, 2.5 billion people spend over 30 per cent of their income on the cheapest smartphone, with 12 per cent of Tanzanians citing internet costs and 7.0 per cent pointing to poor infrastructure, particularly in rural areas, exacerbating the digital divide and Tanzania's high tax burden making it one of the most expensive markets in the region compared to Mozambique and Madagascar.
TIC report
The TIC report for 2021 shows a 14.6 per cent rise in investment projects, with 274 projects generating 43,925 jobs, up from 234 projects and 36,470 jobs previously.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
This growth results from improved infrastructure and streamlined processes via the Electronic Investment Window. Despite this, high smartphone costs and inadequate infrastructure remain barriers to digital inclusion, particularly in rural areas.
Addressing these issues and boosting investments in energy and telecommunications will support the Digital Tanzania project's goal of 80 per cent internet penetration by 2025.
Proposed solutions
to improve digital access in Tanzania, strategies such as digital literacy programs, free or low-cost public Wi-Fi, subsidized smartphones, regulatory reform, support for startups, innovative financing and tax reform to reduce smartphone and internet costs are crucial, complemented by international collaboration, local content promotion and enhanced data privacy and security.
Also read: Lawmakers approve initiatives to enhance communication sector
With President Samia Suluhu Hassan's support underscored by the establishment of a special tax reform committee led by Ambassador Sefue, these goals can be achieved sooner rather than later
