Users of pre-paid airtime sold by telecommunications providers have been slapped with a 15 percent value added tax (VAT) from February 1st. This follows a 15 percent VAT imposed by the Ministry of Finance, which was originally scheduled for implementation in September last year.
The VAT, said mobile phone operators MTC and Cell One, will be levied on the face value of the pre-paid vouchers and will be deemed to be inclusive of VAT. This means that a pre-paid voucher of N$10 will yield an N$8.10 airtime, with the remaining N$1.30 VAT going to the Receiver of Revenue. Residential users of mobile telephones were excluded from VAT when first implemented in Namibia to promote the use of telecommunications services.
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Pre-paid services were assumed to be predominantly residential in nature and were zero- rated [no tax levied]. Permanent Secretary in the Ministry of Finance, Calle Schlettwein, said theVAT was imposed because it is a legal provision in the VAT Act that needed to be implemented earlier. There is an exemption for landlines.
"We have realised that pre-paid airtime remains a VAT-able service," said Schlettwein. The implementation came late, he said, because of operational hiccups experienced by service providers, and hence the second extension on the VAT imposition.
"We have a ruling to implement from the Receiver of Revenue and we are unfortunately duty bound to comply. It leaves us as operators with no choice but to pass the new tax onto consumers which will definitely restrict market growth," said Miguel Geraldes, MTC Managing Director.
Cell One CEO Lars Christian Luel said the operator would have to implement the new ruling "as best we can".
Telecom Namibia has, however, taken a different route, and decided not to pass on the VAT levy onto its customers. "This decision represents an effort to bring relief to the vulnerable groups most susceptible to the increased inflation that the VAT can cause," said Managing Director of Telecom Namibia, Frans Ndoroma.
"Here we have in mind a huge number of prepaid card users, most of whom are students, elderly and non-income earners, for whom the imposition of the VAT would therefore worsen their financial plight. By subsidising this VAT, Telecom Namibia stands to lose "millions" per month, said Manager: Finance and Administrator, Robert Offner.
A study by Nepru indicates that 92 percent of mobile phone users buy prepaid mobile services.
Source: Balancing Act, Issue 391, 08.02.2008 based on New Era.