As the budget day draws near, The New Times will for the remaining days publish views and expectations of ordinary Rwandans, experts and academicians on the budget to be presented to Parliament by the finance minister on June 12. Telecoms today express their uneaseness over the proposed 10% rise on airtime tax.

The government should discard the proposed 10 per cent levy on airtime as this will counter efforts aimed at deepening access to telephone and Internet services, telecom firms have advised. 

The government proposed a 2 per cent increase on excise duty levied on airtime to 10 per cent in the 2014/2015 national budget, up from the current 8 per cent. 

The increment will fetch government Rwf2b in the next fiscal year if it is implemented, but could stifle the growth of the sector, according to the telecoms. Over Rwf906.8b is projected to be raised from tax revenues by the tax body to fund the proposed Rwf1.7 trillion 2014/15 financial year budget.

Paul Mugemangango, the senior manager in charge of legal and corporate affairs at MTN, said it was wrong to categorise airtime as a luxury good, which the proposed excise duty levy is targeting. 

"It is unfortunate that the government thinks airtime is a luxury good…Communication is a basic necessity today; that’s why we are striving to make it affordable for all to promote economic growth. But these efforts will be in vain if the tax increase is not revised,” he said.

He advised the government to widen the tax base instead of overburdening a few tax-payers.

Tongai Maramba, the Tigo Rwanda general manager, said the increase would hurt the industry and raise the cost of doing business. He, however, said the impact cannot be easily measured right now "because Rwanda is a dynamic market”.

Teddy Bhullar, the Airtel Rwanda managing director, said the increase will affect the subscribers, who will ultimately suffer the burden. 

"Customers are price sensitive, therefore, the increase will slow mobile phone penetration rate which was gaining pace,” he said.

Bhullar, however, appreciated the fact that the government had made the tax progressive for the last two years, giving the industry ‘ample time’ to grow.

Experts say telecoms’ earnings are already being  hurt by dwindling Average Revenue per User (ARPU), which stands at Rwf1,360 per month; the lowest in the region. This means that majority of mobile phone users in the country are low-end subscribers, whose capacity to spend on mobile value-added solutions is little. In the end, this depresses the effective rate of revenue realised per minute for operators. 

About 6.8 million Rwandans had access to mobile phones as at the end of February, which is a 64.5 per cent penetration rate. 

The telecom sector got investment incentives in the current budget which has enabled them invest in telecom equipment to extend services to the untapped market segment in the far-flung areas of the country.

"Waiving off taxes on telecom equipment has enabled us to invest more in improving the coverage and capacity of our networks, especially 3G sites, to provide quality services to customers,” said Maramba.