The revelation last week by Communications, Science and Technology deputy minister January Makamba, in his article published by our sister newspaper, The Guardian on Sunday, as a commentary on an opinion published two weeks ago, is both shocking and appalling.
The minister, in his article, claimed to have authentic and reliable data from the regulator, Tanzania Communications Regulatory Authority (TCRA), to back his claims that mobile phone companies have been evading paying taxes for some years now—thanks to a lack of technology to detect their actual revenues.
According to the minister, in the year 2010 mobile phone companies in Tanzania earned $1 billion (Sh1.6trillion), but paid only $1.7 million (Sh2.7 billion) in taxes. But, during the same period, Kenya earned $78.3 million from mobile phone companies, Uganda made $31.3 million while Rwanda collected $14 million nearly ten times what the Tanzania government earned.
If this is the situation, then the public has the right to know why mobile phone service providers are shortchanging the government in paying tax while making trillions of shillings? One would rightly go further and demand to know what measures the government and the Tanzania Revenue Authority have taken to recover the unpaid taxes.
Cellphone service firms are supposed to pay Value Added Tax (VAT) and Corporation Tax for those which have made a profit, plus other taxes as stipulated by the country’s laws. It’s therefore appalling to note that Kenya collected fifty times what Tanzania did from mobile phone companies as taxes in 2010.
As the deputy minister put it, “Surely, you could argue that Kenya’s economy is bigger than ours, but Rwanda - a much smaller economy compared to ours and with only two mobile companies - collected more than what Tanzania earned.”
When you consider that the total number of mobile phone subscribers in Tanzania is far bigger than the population of Rwanda, which has about 11.5 million people, it is an insult to our intelligence to make us believe the country could collect more taxes from the mobile phone service subsector than we did.
It is estimated that Tanzania has about 15 million mobile phone subscribers, though some statistics show that the number could actually be closer to 20 million.
This, coupled with the fact that there are seven (not two) telecom companies operating in the country, namely Vodacom, Airtel, Tigo, Zantel, TTCL, Sasatel and Benson Informatics, it is pretty obvious that the government is getting a raw deal from the firms in terms of tax revenue.
The number of Rwanda’s total mobile users was 4.4 million by February, this year, barely a fifth of the number of users in Tanzania, but still garnered more taxes from its mobile phone operators than Tanzania.
Something must be seriously wrong somewhere – which calls for urgent and effective measures to curb this massive tax evasion in the mobile industry. It defies logic and morally rubs the wrong way for anybody who earns $1 billion to pay the government peanuts in taxes.
It might be a tax paradox to some people, but to us it’s just another one of those fishy deals which have been rocking this country for so many years. The public demands full explanation from TRA about why mobile companies have been taking the government for a ride when it comes to tax payment.
To be fair to all, including the mobile phone companies, we call upon the government to form a special committee to investigate these allegations so that, at the end of the day, fairness and justice is done.
The industry should be thoroughly investigated by an independent body, formed either by the government or the National Assembly, in order to establish the truth about the tax dues from these companies.