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Saturday, 14 June 2008

Talking Taxes

"In Zambia 53% of every dollar spent on cellular services goes into government coffers.."
Not sure how valid this claim is, but you can read more on Zedian's blog.


  1. It is very true. Apparently Zambia is the only country with a tax rate above 50% in this sector. It is the same with the energy sector. That is why both tourists and investors find Zambia a very expensive country to travel in or do business in.

  2. Do we have any sources on this?

  3. Cho
    The top 6 'taxers'on mobile communications in the world are:
    1. Turkey 2. Tanzania 3.Uganda 4.Brazil 5. Ukraine and 6. mother Zambia.

    Have a look at the Deloittes study on here:

  4. Following Turkey in second place is Tanzania, where taxes make up 29.4% of ownership costs. East Africa provides three of the six worst offenders, as Uganda follows in third place with a close 29.2% and Zambia comes in sixth with 26.4%.

    That's neither 53% nor "above 50%".

    How do they calculate it ? I mean, I see references to tarrifs on cellphone imports and luxury taxes but those only work at the purchase of a new phone or when a new phone is imported.
    Surely, there has to be some huge variations in how big of an effect those have on overall mobile communications cost.


    That's the study.
    Unless I missed it, they never say how they calculate the share of cost of headsets on the overall cost. And never say anything about price elasticity of that.

    They are also a bit confusing on VAT. It seems like they have missed the part about VAT where only value added is taxed and VAT expendure about deduced at each stage. Or may be I misunderstood. But here's the best part:

    "There appears to be no direct relationship between the percentage of tax in the
    TCMO and penetration.

    That's before they go in detail and break it down by categories and find out that there is a relationship between taxation of headsets and penetration for instance.

    There's also a very dubious graph on GPD per capita and penetration which seems to suggest that the causality is "buy a phone and you'll get rich".

    But yeah, I would expect the mobile operators to order a study showing that their taxes should be reduced, wouldn't you ?

  6. Its deloitte! lol!
    I'll end there before I get sued for brand defamation or something....

    This 55% claim appears to have come from the Celtel Manager.

  7. Cho, that would be equivalent to a 'GOP' or 'Republican' strategy......attack and discredit the messenger in order to discredit the message!

  8. Frank,

    Quite right. I should know better! lol!

    Where the claim comes from is irrelevant.

    I withdraw my comment :)

    In any case, the tax is high whether its it is 27% or 55%. If this is an industry we want to see thrive because it is crucial for other industries, we should be looking at lower taxes.


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