Senegalese consumers called to boycott mobile phones to protest 2% tax increase on wide range of services
African politicians see the telecoms and Internet sector as the “golden goose” in terms of being able to tax its operators. In various countries a whole raft of different taxes have turned mobile operators into Government’s most effective tax collector. But this week saw the two main Senegalese consumer organisations organise a boycott of services to protest against a 2% tax called RUTEL that falls directly on consumers.
Along with all the other taxes they pay (including TVA/VAT), Senegalese consumers are now being asked to stump up an additional 2% across a wide range of telecommunications and Internet services. The tax is called Redevance d’utilisation des telecommunications (RUTEL) and it came into force on 1 February 2009. Law 2008-46 of 3 September 2008 put the tax on the statute book but its introduction has caused widespread anger.
So for example, a prepaid mobile kit costs about FCFA2,120 and with TVA/VAT FCFA2,500. With the RUTEL tax on the base price it now costs FCFA2,160, giving a final price to the consumer of FCFA2,550, an increase of FCFA50. The wide range of services the tax has been slapped on includes fixed and mobile services, IP-TV services, dial-up and ADSL subscriptions, recharge cards, international roaming, leased lines and interconnection charges between operators. The latter will have the effect of charging the tax twice over to consumers, providing a real case of “double-dipping”, that bears down directly on consumers.
The Ministry of Commerce has pointed out that a range of essentials like food and fuel have actually come down in price but its figures have been contested in the discussions taking place on Senegalese blogs. It seems that the announced reductions in price often turn into price rises later.
As with TVA/VAT, the operators have been given the responsibility of collecting the tax and as a concession to the operators they are now freed of any taxes or customs duties on the import of mobile and fixed phones.
In reaction to this tax raise, Senegal’s two main consumer associations, l'Association des consommateurs du Sénégal (ASCOSEN) and l'Union nationale des consommateurs du Sénégal (UNCS) have called for a boycott of the use of mobile phones today, Friday 6 February 2009. “The Senegalese state has decided, in a unilateral manner, that is peremptory and without justification to raise by more than 2% the cost of telecommunications,” the President of ASCOSEN, Momar Ndao told a press conference on Thursday. He estimated that the Government will be taking FCFA33 million a day from consumers’ pockets.
The joint plan of action for a boycott has been organised by sending SMS messages to consumers telling them the boycott will take place and calling on them to stop all bill payment, opening new subscriptions, buying credit from 8am to 3pm and stop using their mobile from 1pm to 3pm.
One of Senegal’s ICT sector associations, Le Rassemblement des entreprises du secteur des technologies de l'information et des télécommunications (RESTIC) issued a statement saying that it considered the boycott to be "counter-productive and unacceptable." The statement argued that:”Mobile service is not just a commodity for the majority of consumers but a necessity for most of them. This boycott will be a useless trouble to users and leave operators having to make up lost revenue.” According to RESTIC, the operators and employers were not involved in the decision to introduce the new tax and operators were already paying up to 3% on turnover as a contribution to the universal service fund Fond National de Développement de Service Universel (FNDSU). Therefore it invited the Government to rethink all taxes placed on operators.
There have been two consumer boycotts of mobile phones in Nigeria, the first in 2003 caused a significant dent in operators’ revenues but the second several years later had much less of an impact. There was talk of a similar boycott in South Africa but it never seemed to get off the ground. The complicated way the boycott has been structured in Senegal (with different hours to boycott different services) may also mean that the impact is not as great as its promoters might hope. A similar all inclusive tax was introduced in Ghana in mid-2008.
African Governments in the main do not have a strong record of tax collection and have turned mobile operators into their chief tax collectors. The largest proportion of Government revenues comes both from TVA/VAT collected directly from consumers and also the wide range of other taxes they pay the Government. African politicians of all stripes see the telecoms and Internet sectors as a “golden goose” that produces easy money.
The contradiction at the heart of this taxation policy is that there is clear evidence that the more you charge consumers for communications services, the less they will use them and the more it cuts out the marginal user who really struggles to pay for these services. President Wade has been one of Africa’s most vocal politicians in calling for the closing of the digital divide. A tax policy of this kind simply widens the divide.
For as one Senegalese blogger, Souleymane Jules Diop, wrote yesterday:”It’s not the phone that’s to blame. It’s (President) Abdoulaye Wade whose to blame.” Perhaps this boycott will make African politicians think again before they reach out to stroke “the golden goose” for more money.