Vodacom overtakes mining, banking in tax contributions

 

In Summary

• 47bn: Amount in shillings the company paid last year as corporate tax
• 156bn: Amount in shillings the company posted as gross profit in 2014

Dar es Salaam. Vodacom Tanzania paid a staggering Sh47.1 billion in Corporate Tax last year, meaning the country’s largest mobilephone company was among the most profitable corporations locally.

The company says it is so far the second largest taxpayer in the country, after Tanzania Breweries, although it did not state in its financial report unveiled yesterday the total taxes it paid in 2014.

To put things into simple perspective, what Vodacom paid last year as taxes is bigger than what the much-debated mining firms—Geita Gold Mine and Acacia Mining— remitted.

Corporate Tax (Corporation Tax) is a levy charged on the gross profit of entities such as limited companies, organisations, clubs, societies, associations and other unincorporated bodies. For firms that are not listed on the Dar es Salaam Stock Exchange, the corporate tax rate is 30 per cent, signaling that Vodacom Tanzania may have made a gross profit of not less than Sh156 billion during the 2014 calendar year.

Going by Tanzania Communications Regulatory Authority (TCRA) figures, Tanzania had a total of 30.58 million Subscriber Identification Module (Sim) cards as at September 2014. Vodacom was leading the pack with some 11.316 million Sim cards.

Without specifying the chief sources of profits within the various sub-categories of its operations, the company said yesterday it would spend Sh150 billion to finance its expansion and service improvement programme in 2015 as it seeks to grow further.

The money will be used in investment in 2G and 3G sites and improving its M-Pesa services as well as other innovations.

However, Vodacom bemoaned a tough environment resulting from a drop in prices of both data and voice services while taxes have been going up in recent years.

Vodacom Tanzania managing director Rene Meza said the price per minute dropped from Sh58 in January 2013 to Sh24 in January 2015—representing an almost 59 per cent decrease— while the price per megabyte decreased from Sh9 to Sh5 (45 per cent drop) in the same period.

On the other hand, he said, excise duty on airtime increased from 5 per cent in 2002 to 17 per cent in 2014, making it one of the highest in Africa.

“These low prices are posing a challenge on our ability to continue investing. In reality, where did you see for instance food prices dropping by over 50 per cent in one year,” said Mr Meza during a press briefing.

The firm reported a 45 per cent increase in voice calls while internet usage almost tripled between 2013 and 2015.

Mr Meza said investment in the mobile communication services sector is capital intensive and continues to be hampered by, among other things, the existing energy infrastructure which requires telecom companies to connect most of their sites to generators running on fuel.

However, he promised that rural coverage remains a priority despite the challenges that come with it.

“We believe this is where growth in the telecommunications industry will come from in the next decade,” he said, adding that the firm has to date contributed Sh4.5 billion to the Universal Communication Services Access Fund (UCSAF).

M-Pesa is now transacting Sh1.2 trillion per month and the mobile money transfer platform has been integrated with 20 banks in the country, Mr Meza said.

The initiative was strengthened in May last year by the introduction of M-Pawa, a bank account that can be used by M-Pesa users to deposit and earn interest as well as enabling subscribers to borrow up to Sh500,000 through their mobile phones.