High taxes on mobile hampering DRC economic growth

July 25, 2018 6:04 am3 commentsViews: 13

taxesfrom JEAN KASSONGO in Kinshasa, DRC
KINSHASA – EXORBITANT mobile sector-specific taxation is hindering mobile adoption and potential gross domestic product (GDP) growth in the Democratic Republic of the Congo (DRC).

This is according to the Global System for Mobile Communications (commonly known as GSMA), which has called on the government to initiate taxation reforms and boost the economic welfare of millions of its citizens.

The recommendations are carried in a report by GSMA, titled “Reforming Mobile Sector Taxation in the DRC: Enabling Economic Growth Through a Supportive Tax System.”

The report, authored by Ernst & Young (EY), analyses the potential benefits of a more efficient tax structure for the mobile sector in the DRC, with a focus on increasing mobile affordability and unlocking digital inclusion.

The report finds that the implementation of tax reforms would benefit the broader economy and the government’s fiscal position while expanding mobile adoption.

It forecasts that a boost in mobile penetration in the DRC would lead to growth in productivity across the economy, increasing GDP, household incomes, employment and investment.

John Giusti, GSMA Chief Regulatory Officer, said “reforming mobile sector taxation would unlock vast socio-economic benefits for the DRC, already one of the fastest-growing digital economies in Africa.

Currently, the executive said, the tax burden on the mobile sector remained among the highest in Sub-Saharan Africa, constraining growth in mobile penetration, particularly for low-income citizens.

“Our report highlights the need for mobile sector taxation that achieves a better balance between revenue maximisation, economic growth and social development,” Giusti said.

GSMA research shows that the mobile industry is playing an increasingly important role in driving economic growth and digital inclusion across the Central African country.

The number of mobile subscribers has grown substantially, from 4,9 million in 2007 to 29,3 million in 2017, at an annual average growth rate of 20 per cent.

Unique subscriber penetration increased from 8,2 per cent to 35,5 per cent over the same period.

The mobile sector generated $1,1 billion in economic value in 2017.

GSMA’s report concludes that there is still a significant opportunity to increase mobile penetration and grow GDP through policy reform on mobile sector taxation.

In DRC, taxes on the mobile sector are disproportionately high compared to other African countries. The mobile sector contributes approximately 20 per cent of total tax revenue, despite accounting for just 3,6 per cent of GDP, meaning the total tax contribution of the mobile sector is almost six times the size of the sector in GDP terms.
– CAJ News

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