Weeks since government announced plans to increase excise tax on airtime from 8 to 10 per cent in the 2014/15 budget, mobile telecommunication companies are still deliberating on what adjustments to make on airtime prices.
Pierre Kayitana, Tigo’s public relations manager told The New Times that though it was too soon to predict the tax increase’ s impact on the industry, the move was likely to increase the cost of doing business.
“This would most likely increase the cost of doing business which will in turn lead to increase in pricing. However, Rwanda is a very dynamic market, so it is too soon to predict the impact on the industry,” Kayitana said.
A statement from MTN, the leading telecommunications company with 53 per cent of the total mobile phone subscribers noted that the company was yet to decide on the way forward, but hinted on the likelihood that the tax increase would affect the pricing of the end products.
“The increase in excise duty from 8 to 10 per cent will definitely affect the business. The implication of this increase might also affect the price the end customer will pay for all MTN services. We’re still evaluating the impact of this tax on the other areas of our business,” the statement part reads.
They, however, noted that any price changes would be communicated to clients.
In a previous interview with The New Times following the budget reading, Teddy Bhullar, Airtel Rwanda managing director, had said the increase in taxation would have a negative impact on penetration levels as cost would be much higher.
Rwanda Utilities and Regulatory Authority (Rura) says it will not regulate or interfere with telecommunication companies’ price revisions following the adjustment of taxes on airtime.
Jean Baptiste Mutabazi, the head of communications and media regulation department at Rura said Rwanda being an open market is not subject to tariff restrictions or regulations.
“We believe there is enough competition for the sector to regulate itself. We only regulate tariffs on interconnections and charges on infrastructure sharing,” Mutabazi said.
Following the budget reading, there has been anticipation by telecom users that there is an oncoming upward adjustment in calling rates and data charges to make up for the tax increase.
Mutabazi warned telecommunications companies against increasing their prices too much as it could make them lose clients.
Taxes on airtime were adjusted upwards in this year’s budget in a move that the finance minister said was aimed at harmonising the tax rate with other East African Community (EAC) partner states which introduced the levy in the previous financial year.
“We agreed in 2011 to gradually increase excise duty on airtime. We were supposed to increase last year but the industry wasn’t fairing well, so we postponed it to this year,” Finance minister Claver Gatete, explained during the budget reading.