Excise duty and the ghost of cheap internet

06/09/2017 TechTrends

On the 15th of September 2016, we ran a piece on the hashtag datamustfall. The #datamustfall rallying cry was South Africa’s response to the cost of data. In news here at home ZRA has effected a 17.5% excise duty on airtime.

To quote the Acting Director General of the ZRA, Mr George Mwale:

Section 139A of the Customs and Excise Act defines Airtime as follows:

“Airtime” means the minutes of voice calls, short message service (sms), multimedia service (mms), internet band width [sic] or such service as a subscriber may consumer through a mobile cellular telephone or any other electronic communications service;

“electronic communications service” means a service provided by means of one or more electronic communications networks (Information and Communication Technologies Act, 2009).

Firstly, what is mms? Whilst that age verification test is being conducted let us have a look at the two definitions above. The definition of electronic communications service is meaningless because all they have done is swap network for service at the end of the sentence. If someone can make service of networks please mms me. Being the curious soul I am I decided to look up the definition of ‘electronic communications network’, and according to the world at large the accepted definition is:

An electronic communication network (ECN) is a type of computerized forum or network that facilitates the trading of financial products outside traditional stock exchanges. An ECN is generally an electronic system that widely disseminates orders entered by market makers to third parties and permits the orders to be executed against in whole or in part.

If my memes are financial products I need to get paid!

Mr George Mwale goes on to state that Local Excise is mandatory at the rate of 17.5%. That is a shocker, in a market where consumers have long complained about exploitation by the telco’s government has responded by slapping an additional duty. The result of the duty is to further increase the cost to use the internet, something that the United Nations has said is a universal right. The UN further clarifies that the internet must be easily accessible and affordable thereby helping bridge the digital divide, whilst being the driving force in accelerating progress towards development in its various forms, including in achieving the Sustainable Development Goals. This Excise duty means marginalising the poorer members of society further entrenching the digital divide. ZICTA has spent millions of dollars building towers as part of its Universal Access Fund initiative, but what benefit is that if no one can afford the talk time?

Consumers will continue to point figures at telcos and ISPs for the prices they pay. Who makes the most money out of every Kwacha you spend on ‘Airtime’? The government takes the following chunks out of the face value of your ‘Airtime’:

17.5% excise duty
16% VAT
2% ZICTA (on annual turnover)
40% corporate taxes on profit

I excluded license fees because they can be seen as an investment. With that level of taxation, how can we have affordable data services within the country? For every K100 the consumer pays an extra K40 in taxes excluding corporate tax!

Oddly the social media scene is mum on the data prices and tax burden. We need the community to lobby and help reduce the cost of access. If data is seen in the same light as water and maize meal we cannot tax it like a luxury good. The internet is the great equaliser and must be affordable by all, not the exclusive treat for the rich. Recent reports state that for every increase of 10% of internet penetration a countries GDP increases by 1%.

Could this a case where the government may make more money than an operator from data?