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 Friday, July 02, 2010

­The Rwandan government has announced plans to scrap sales taxes (VAT) on mobile phones, although that was then offset by a rise in the excise duty on airtime from 5 to 8 percent. The airtime tax will also be progressively raised to achieve harmony with regional countries - where the rate averages between 10 and 12 percent. The airtime duty is on top of sales taxes, which ranges from 16 percent to 18 percent - ranking the East African region as one with the highest calling rates in the world.

The East African Communications Organisations (EACO) has been calling for the excise duty to be scrapped, saying that lower call costs would lead to higher volumes, and hence higher net taxable revenues via the sales tax.

Price Water House Coopers (PWC), a global consultancy firm said the removal of VAT on petroleum products and mobile handsets demonstrates the government's progress in harmonizing its laws with those of other East African Community (EAC) countries.

While the removal of VAT on mobile handsets will make handsets cheaper, PWC says 3 percent increase in excise duty on airtime is likely to have a negative impact. "The mobile handset suppliers may be unable to claim all their input VAT, and as a result may attempt to pass on this additional cost to their customers," the firm said in a statement.

Import duties on SIM cards are also expected to be scrapped in the near future.

Source: Cellular News