Tax on international inbound calls: Too good to miss… as more African countries are tempted to go this way

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The list of African countries that have implemented, are planning to implement or have failed to implement a tax on international inbound calls is getting longer by the day. The non-exhaustive list of “shame” includes countries like Congo-Brazzaville, Guinea, Niger, Côte d’Ivoire, Gabon, Mauritania, Madagascar, Ghana, Senegal and Liberia. Balancing Act has been following the story since the failed attempt of the Government of Côte d’Ivoire back in August 2009. Isabelle Gross looks at the latest twists in the Senegalese case and the attempt of the Liberia Telecommunications Authority to introduce a similar tax in one of the poorest countries in Africa.

Following a presidential decree dated 19th November 2010, Senegal suspended an earlier decree dated May 2010 that introduced a tax on international inbound calls with the result that the minimum tariff for an inbound call increased to US$0.37 per minute compared to the previous rate of US$0.20. At the time, the overall annual revenue generated by the tax was estimated at US$135 million per year (60 billion CFA francs). Less than six months after the suspension decree, Senegal’s telecoms operators have again to face the reintroduction of the tax on international inbound calls. However this time, the Senegalese Government seems to have learnt some lessons from the failed first attempt as it has been trying to win the support of various interest groups including the Senegalese diaspora. The Government of Senegal has announced that it will use the proceeds of the tax in the following order: US$34 million (15 billion CFA francs) to help the Senegalese diaspora resettling in the country; US$56 million (25 billion CFA francs) for rural electrification; US$22 million (10 billion CFA francs) to support Senegalese buying power and to improve the health, sport and culture sectors. This amounts to a total of US$113 million (50 billion CFA francs). It remains to be seen what the remaining US$13 million (10 billion CFA francs) will be used for.

Despite all the efforts that the Senegalese Government is putting in to get the tax on inbound international calls reinstated, it is still not going down very well. In order to convince the Senegalese diaspora, a delegation of Senegalese, including Mr Momar Ndao, the head of the Consumers Association of Senegal, went to Paris to meet them. On May 31st they held a meeting at the French Consulate to seek the acceptance of the diaspora in return for the creation of resettlement fund. The meeting didn’t go very well as shown in the following video clip published a couple of days later on Daily Motion.

Since then, the case has escalated further in Senegal: a special presidential meeting on the topic of international inbound calls has turned sour and the Union of Telecommunications workers has called a strike. The Senegalese newspaper, the “As” reported that Cheikh Tidiane Mbaye, the head of Sonatel (the national incumbent) said during the meeting that he felt embarrassed because this was not a meeting about a tax on international inbound calls but rather a meeting against Sonatel. He further added that “Mr President, you said earlier that we like money. I would like to add that I don’t like money but I like development. This is different. You, you like money”.  Following this meeting, the head of the Union, Mamadou Aïdara Diop said that they will call for a national strike against the tax on international inbound calls. Interestingly, the latest news on how the tax on inbound calls will be allocated has changed too: there is no longer any reference to a fund for the diaspora and the US$135 million will be devoted to US$45 (20 billion CFA francs) for the electricity sector, US$18 million (8 billion CFA francs) for ICT projects (e-cases), US$11 million (5 billion CFA francs)  for digital projects (purchase of computers) and US$11 million (5 billions CFA francs) to improve water supply. The local Senegalese press has also reported that Global Voice Group might sue the Government of Senegal for breach of contract.

As pressure is mounting in Senegal for the withdrawal on the tax on international inbound calls, it is not yet clear how it will end in but we dearly hope that common sense will prevail. As more and more African countries think about introducing a tax on international inbound calls, the leader in implementing such services, Global voice Group (GVG), is no longer the only game in town. Any telecoms tech will tell you that it is not rocket science to put in place a monitoring system to control inbound international calls. Companies that offer the same services as GVG have understood that the appeal of this game is the easy money that it generates.

Following on from Senegal, Ghana or Guinea, Liberia has decided to go the same way. A couple of weeks ago, the Liberia Telecommunications Authority (LTA) issued a draft regulation on international traffic. The 4-page document must have been written in a hurry because it remains unclear from the document what type of traffic will be monitored and taxed. The LTA in its draft regulations refers sometimes to “international inbound and outbound call data and rates for call termination” or “to all calls routed to +231 country code irrespective of the routing method” or “the implementation of a traffic data monitoring and retention solution for both domestic traffic and international inbound traffic” or “the international gateway monitoring facilities … …. shall be used for the monitoring of all traffic”.  The least, this regulation is very confusing apart from the fact that LTA prescribes that “all international inbound calls terminating to subscriber number with country code +231 incur a minimum regulatory fee of US$0.15 per minute (on top of the US$0.12 per minute wholesale price) and shall be collected by the terminating service provider on behalf of LTA”.

While telecoms operators in Liberia are turned into tax collectors, it might be worth reminding the LTA that such a “regulatory fee” contravenes:
- the ITU’s International Telecommunications Regulations (also know as the “Melbourne Agreement”), Article 6.1.3 states that fiscal taxes shall normally be collected only on international services billed to customers in that country; while there are proposals to reform the ITRs, it is specially recognised that reform of 6.1.3 shall avoid permitting double taxation.
- the World Trade Organisation’s Annex on Telecommunication Services (1988) which states that taxes should not be higher than local interconnection rates.
- Recommendation D.140 of ITU (2002) requests that tariffs including termination rates should be cost-orientated.

Further, telecoms operators in West African made it clear in the “Declaration of Dakar” issued in November 2010 that they remain against such taxation systems. Besides the legal infringements, Liberia will also need to think about the economic consequences: it will impact negatively on the international competitiveness of the country and drive up the cost of doing business at a time of global economic downturn; the increases in the cost of termination of incoming international traffic will have a negative impact on Liberian businesses wishing to develop exports; for Liberian families with members living outside Liberia, the increased cost of calls to their home country will translate into fewer, shorter calls and less money available for remittance to Liberia.

Recently I had an email exchange with a Liberian person living in the US and his answer on the question of taxing international inbound calls was “ the LTA's regulatory fee issue is in my opinion, not progressive”. Progressive is the key point. It is all about developing a regulatory framework that is an enabler rather than issuing regulations that take telecoms operators and consumers for a “cash cow”.