Lighter taxation encourages market development for telecoms in Africa: FERDI

5323340860 28957b4c7a zThe Foundation for Studies and Research on International Development (FERDI) has launched its study on taxation in the African telecommunications sector

At the request of the telecom company Orange, FERDI developed an Average Effective Tax Rate (AETR) model based on the lifetime of a mobile telecommunications license and applied this approach to Orange's subsidiaries in nine African countries.

The study showed that, despite economic integration, the telecommunications market remains fragmented by national legislation and regulations.

FERDI has revealed that lighter taxation promotes market development for telecommunications and state revenues. The findings showed that a unified treasury resulting from suppressing specific taxes will increase the revenues of the states.

It also added that revenue-based tax limits the development of the activity (and thus the country’s digital development).

The irreversibility of investment (licenses and network equipment) justifies the need for tax stability for investors and telecoms, which plays a major role in increasing VAT and reducing the informal economy, the report said.

The report concluded that there are win-win scenarios (for states and telecoms) in the countries and models that have been studied in details by taxation experts. Thus, there is a need for a taxation method that can promote these win-win models

This approach has provided a ground for discussing tax policy applied to telecommunications firms, taking into account detailed investments and operating costs over the licensing period.

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