Ningo Prampram MP Sam Nartey George has said the government of Ghana must immediately reverse the “nuisance” increase in the Communication Service Tax (CST) which came into effect recently.
The Ministry of Communication recently directed the National Communication Authority (NCA) to immediately have all mobile phone network operators stop deducting the nine per cent CST upfront and also stop sending customers notifications of the CST deductions.
The ministry said in a statement on Friday, 11 October 2019 that: “To minimise the negative impact of the current mode of deduction of the CST, the Ministry of Communication hereby directs the immediate implementation of the following measure: CST should be treated the same way VAT, NHIL, GETFUND levy and all other taxes and levies imposed on entities doing business in Ghana are treated”.
“These extraordinary upfront deductions of CST and notification of same to the subscribers must stop with immediate effect,” the ministry added.
The ministry also ordered the telcos to roll over unused data bundles.
“All unused data and voice bundles purchased by subscribers do not expire and must be rolled over with the next recharge”, the statement ordered, adding: “MNOs [Mobile Network Operators] will be subjected to strict compliance with existing Quality of Service (QoS) standards to ensure value for the subscribers’ money in accordance with their licence obligations.”
In a 10-point write-up, however, Mr George, who is on Parliament’s Communication Committee, said: “The Minister of Communication’s directives are akin to the Minister of Lands & Natural Resources issuing directives to any of the mining companies operating in Ghana specifying how prospecting should be done, what kind of engineering equipment should be used, how much tonnage can be extracted in a year and at what price they can sell on the international market. This is in actual fact, how absurd the directives to the MNOs are”.
He added: “If the government is truly worried about the cries and complaints of the Ghanaian people, the government should not intimidate and threaten foreign investors who run the MNOs. The government should withdraw the obnoxious CST increase. Anything short of that is hypocrisy. It is regrettable to see the threat from the minister to business interests in Ghana which employ Ghanaians to effectively collapse these businesses if they fail to comply with her illegal directives”, the opposition MP argued.
Read Mr Sam George’s full statement below:
Over the past few days, there has been a raging discussion over the Communications Service Tax and the directives issued by the Minister of Communication, Hon. Ursula Owusu-Ekuful on our airwaves and among industry players.
There are a few incontrovertible facts that are not subject to personal, partisan and parochial interpretations. These facts must necessarily guide the conversation and distinguish service to the nation against political and personal gain.
1. The CST was introduced in 2008 under the John Agyekum Kufuor administration. It became law on the 28th of March 2018 after Presidential assent to Act 754. There have been two amendments (Act 864 of 2013 and Act 998 of 2019) which have widened the scope and value of the levy but not altered the fundamental structure of the levy. It was introduced as a 6% levy on all charges payable by the Consumer for the use of communications services as stipulated by L.I. 1719.
2. CST like VAT and NHIL are consumption taxes that crystallise immediately a recharge is purchased and not when it is used. This is to enable efficient calculation and collection as per the Act which stipulates a one-month reporting window. The implication of the foregoing is that immediately a recharge is purchased, the VAT, NHIL & CST become due and the MNOs are required to collect it and pay it to government by the end of the next month.
3. In 2008, due to commercial considerations, the MNOs took a corporate decision to front end the CST payments to government in order to achieve compliance with the law. This also meant the MNOs had to bear the cash flow risk of actual deductions and collections in a piecemeal fashion as and when the subscribers used their services. For the avoidance of any confusion, this decision was not a policy directive from any government agency or operative but was solely at the discretion of the MNOs and was a commercial decision.
4. Proof of this is the fact that despite the introduction of the CST, there was no attendant increase in tariffs or reductions in QoS. Prices and values remained unaffected by the introduction and application of the CST. The state of the market in 2008 cannot be said to be the same today. The industry is suffering from bad government policies that have skewed the sector and led to dwindling businesses.
5. If government is minded to treat the collection of CST on usage basis, the Minister of Finance should just lay a Legislative Instrument before the Parliament of Ghana that says so. The Minister of Communication has clearly overstepped her mandate and her indication that this is a policy directive in line with the Electronic Communications.
Act is at best self-serving and at worst ignorant. Her directives do not in any way, form or shape qualify as policy by any stretch of imagination. Her directives are rather administrative and operational.
6. The directives from the Minister of Communications are legally invalid as she CANNOT vary the structure of the CST Law as passed by Parliament. She cannot convert a consumer tax into a corporate tax. She has no legal power to compel any corporate entity to absorb what is in essence a consumer tax in addition to their corporate tax obligations. The entire argument of the notification of deductions when one purchases voice or data credit and the attempt to play the Ghanaian people against the MNOs is disingenuous. The MNOs are simply complying with Ghanaian law passed by Ghana’s Parliament on the back of a bill presented by the Ghanaian Minister of Finance on behalf of the President of Ghana. If the Ghanaian people are angry and rebelling against the CST deductions, there is only one person ultimately responsible – Mr President and his Cabinet.
7. It is of little consequence if deduction notification is given at the time of purchase or as a separate stand-alone message or as the government wants it – no message at all – the fact remains that the ordinary Ghanaian would pay GHS0.70 for every GHS10.00 worth of recharge bought.
8. Just for clarity sake, when Ghanaians go to a shop and buy an item, a look at the receipt would indicate the cost price of the item, the cost of VAT & NHIL and the total cost which is a sum of all three (3) cost lines. It is the same way when you buy GHS10.00 worth of airtime and you get GHS9.30 airtime and a notification of the GHS0.70 for CST, the total comes to GH10.00. The same billing system applies to purchase of electricity today from ECG, or is it PDS? Deductions are made and customers do not get the full value of what is paid at the counter. How does the Minister describe that also?
9. The Minister of Communication directives are akin to the Minister of Lands & Natural Resources issuing directives to any of the mining companies operating in Ghana specifying how prospecting should be done, what kind of engineering equipment should be used, how much tonnage can be extracted in a year and at what price they can sell on the international market. This is in actual fact, how absurd the directives to the MNOs are.
10. If the government is truly worried about the cries and complaints of the Ghanaian people, the government should not intimidate and threaten foreign investors who run the MNOs. The government should withdraw the obnoxious CST increase. Anything short of that is hypocrisy. It is regrettable to see the threat from the Minister to business interests in Ghana which employ Ghanaians to effectively collapse these businesses if they fail to comply with her illegal directives.
In the coming weeks, I would further expose the true rationale behind the increases in the CST by 50% and why the government is not considering a withdrawal despite popular displeasure at the increment.
The Ghanaian people certainly deserve to know what government is doing with the taxes they pay. The situation is dire and there is the need for those who hold the levers of power today to realise that they do so in trust for the people of Ghana.
The Ghanaian people demand the immediate repeal of Act 998 of 2019 which has increased CST by 50% and expanded its scope to include even our TV services. This is unacceptable and unconscionable from a government that promised a move from taxation to production. Ghanaians are angry with the NPP’s October to Remember – Electricity, Water & CST increases.
I stand on the side of the Ghanaian people who demand an immediate reversal of this nuisance killer increases. The status quo must change!
GOD bless our Homeland Ghana.
HON. SAMUEL NARTEY GEORGE(MP)
(Member, Parliamentary Select Committee on Communications)