Internet taxes: From targeting users to service providers

Since Uganda broached the subject of internet taxes in July 2018, several other African countries took a que from the East African nation and introduced similar taxes in the hope of raising additional revenue. A new pattern of ‘tax’ in form of dubious fines may be on the horizon. In August 2018, Nigeria charged MTN $8.1 billion in fines for funds illegally repatriated between 2015 and 2018; this was in addition to a $2 billion fine for unpaid taxes. As early as 2015, MTN received a $5.2 billion fine for failing to disconnect over 5million-unregistered sim-cards.

Similarly in 2017, Zambia Information and Communications Technology Authority (ZICTA) fined all three mobile phone operators MTN, Airtel and Zamtel a cumulative total of over ZMW3 million for poor quality of service.

In April of this year, Vodacom Tanzania’s top executives were arrested and charged with 10 counts for economic sabotage for allegedly leading a criminal network that costed the government a loss of TSH11 billion. The charges included issuing numbers without a licence to do so and illegally importing and installing communications equipment. Many other similar incidents can be cited; in Rwanda for example, MTN was charged $8.5million for externally hosting an IT hub in Uganda instead of Rwanda, while in Ghana the National Communications Authority (NCA) fined all four mobile operators Airtel, Tigo, Glo, MTN and Vodafone for non-compliance of various quality of service requirements. Likewise, Safaricom in Kenya faced similar fines.

While in unclear circumstances, three foreign executives working for MTN Uganda were deported in January 2019, for allegedly using their position to compromise national security. Although no formal charge or fine was levied. As it may seem, African governments through their respective communications regulators have found a way to supplement their income through questionable fines and other financial penalties.

A 2017 study by Xalam Analytics found that the highest cumulative fine value imposed on a single mobile operator since 2015 amounted to $400, translating to an average of $100 million per year. Although masked as quality of service violations, the trend in fining telecoms giants is unsustainable and will have adverse effects on the communications sector in the long term.

The quest to extort revenue from mobile phone operators through regulatory fines and claims will not only discourage new investments in the communications sector but also subsequently drive them out of the markets. In addition, the cost of communication is likely to increase, as the remaining operators will have to make up for lost income by increasing tariffs, consequently forcing the consumer to pay the price.

Moreover, fines will eliminate the competitive advantage and hamper innovative product solutions that could benefit people greatly. Amidst damning ICT sector reports due to the introduction of WhatsApp and internet taxes; this is a trend to watch as more African governments are looking for ways to collect more revenue while regulators are equally under pressure to make up for lost revenue caused by the rise of Over the Top (OTT) services. In addition, the pressure to genuinely enforce quality of service guidelines while trying to ‘prove’ regulatory effectiveness.