Zimbabwe’s mobile operators saddled with huge tax burden – Government takes 27.5 cents off every $1, another 5 cents to be added

Posted by Read 13 Comments

Zimbabwe’s mobile network operators (MNO) have been facing a lot of criticism for the high cost of mobile data with the peak of this public outrage expressed in January when Econet Wireless, the country’s largest operator adopted a floor price strategy which raised the cost of data astronomically.

The increase was eventually reversed after a huge outcry and fingers were pointed at different players. Recently, the parliamentary committee on ICT called in the operators to a hearing on the events surrounding the increase.

In one of the presentations delivered by Econet Wireless, the MNO’s Chief Financial Officer, Roy Chimanikere briefly explained some of the dynamics in their cost model. He also highlighted how as an operator they pass on 27.5 cents off every dollar they make to the government.

This is made through fiscal contributions (these are the standard taxes that it pays as a registered company) plus additional obligations to the regulator. MNOs currently contribute 1.5% of their revenue to a Universal Services Fund. This is meant for infrastructure development in Zimbabwe’s remote areas.

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Part of the fund has also been earmarked for the Innovation Fund which is anticipated to be a resource pool for Zimbabwe’s tech innovators and entrepreneurs.

MNOs also pay a 5% levy on all airtime sold. This was introduced in 2014 by the Ministry of Finance. Plans are already underway to introduce another 5% levy on airtime which will be meant for the National Health Fund.

After all these contributions the operators then have to use what’s left to settle its debts and handle operational costs.

While there is a clear case for data prices to be revised considering the tough economic conditions and an already steep pricing schedule, the point that Econet managed to deliver is that Zimbabwean telecoms have been tagged “it” as far as State cash cows go.

An increase in taxes puts a strain on any business and where viability is a concern this usually ends up being passed on to the consumer. It’s hardly surprising then that all mobile operators were keen on the idea of floor prices.

Perhaps any hope of #DataMustFall ever being a reality should start with a review of how the service providers are being put under a lot of strain before they sell the data to consumers. The lobbying efforts should also be directed at the regulator and the State.

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13 Comments

  1. Tonderai says:

    You should correct your story along the following lines:
    VAT is not a tax burden on the MNO because the MNO calculates its revenue based on $0.775 per $1 used by the customer. The actual tax (excise duty) levied is the current 5% which may soon become 10% if the budget is approved in its current form.

    1. Zimbo says:

      It has never been a burden on MNOs, it’s a burden on us because the dollar is ours

    2. Imi Vanhu Musadaro says:

      You haven’t written an impartial article. Econet is not the only operator. If I’m not mistaken, at the parliamentary presentations by MNO’s, Econet was the only one advocating for floor pricing, and higher tariffs. Data tariffs are still high, when the consumer pushes for them to be reduced they will be making even less revenue. They should tighten their belts and prepare to be competitive, not crying all the time like a spoilt child. Even when it comes to PAYE, those who earn more are taxed more, why cry foul because it is now in the context of companies?

      1. Usadaro Shaa says:

        Econet may not be the only operator yes. But they are the only operator bearing these taxes fully. The Netones and Telecel may not be remitting any VAT, PAYE, Excise duty nor Corpotare Tax to the State at all. Foe every dollar that you pay to Econet, $0.27 can not be managed by them.

  2. Sabhuku Chikoto says:

    What does airtime have to do with health? Why don’t they add the 5% levy on things that actually cause health problems like cigarettes and alcohol?

    1. Imi Vanhu Musadaro says:

      Tax isn’t not always prescribed on a cause and effect basis. Besides that, are the hospitals full of drinkers and smokers only? Even if the health tax was put on tobacco and alcohol, your mentality stipulates that it should only benefit drinkers and smokers visiting health institutions.

    2. Tonderai says:

      There already is excise duty on tobacco and alcohol.

  3. Mercy says:

    Please bring back a “Coalition Government” to save us all. PLEASE

  4. KG says:

    Your article while trying to be informative lacks comparative data. How much aforementioned industries that cause or exacerbate health risks (alcohol, tobacco, petroleum) pay? The VAT point too must be made, we pay that. Also tax is calculated on Profit (after the expenses they cry about whereas levies are paid on revenue. Just a little clarification of what’s what please.

  5. Macd Chip says:

    We are all paying that. The MNOs just pass the cost to the user. Just like another 15% tax on food stuff being levelled to stores, they will just pass that to consumers.

    The government is surviving on taxes, nothing creative to revive the economy. But you can tax so much, in the process, Chinamasa is killing the little that is left of economy. But its not like he have any other choice.

    1. KG says:

      They have lots of choices…. one simple one comes to mind.

  6. Sagitarr says:

    This “govt” has many choices. First, cut staff. If you can’t pay staff retrench or cut salaries. Second cut presidential overspend on trinket journeys around the world, the economy can’t afford it.Cut back on ministries, their number gives the impression that we are a very advanced nation when we’re not. We are a poor 3rd world country lets get used to that!
    I pay 25% tax on additional sales I make in complementing my salary, I will never find an excuse to carry the burden of a govt which wants to spend what it cant earn – its called madness. We have thieves in this govt, I’m not proud of THAT.

  7. IK says:

    the cost of doing business in this country is not really other factors based but majorly pushed up by gvt who think the only strategy to raise money is taxing, As a person in fuel business if we remove the component that goes to gvt alone Zimbabweans will buy fuel for about $0.80/L

    The burden placed on MNO is huge but what makes it worse is the actually company paying and meeting all these taxes happens to be Econet, the other two dont pay for anything hence their boards can comfortably steal millions of tax payers’ money. where was Supa when Net One was wasting so much of a scarce resource?, where is he when Telecel and Net One are not paying licence fees, where is he when the gvt is taxing this industry to death like this.

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