Effective tax burden on mobile network operators in Africa

This study presents a comprehensive analysis of the tax burden on the mobile telecommunications sector across twenty-nine African countries, encompassing both general taxation and sector-specific levies. To conduct this assessment, we develop a model of a representative mobile network operator, referred to as TELCO, and compute its Average Effective Tax Rate (AETR) by incorporating both standard tax obligations and industry-specific fiscal charges. The average AETR is significantly high, ranging from 77 percent to 116 percent (or 44 percent to 83 percent when excluding license fees), depending on the assumed indirect tax incidence. Notably, the AETR exhibits a regressive pattern, whereby the relative tax burden decreases as gross profitability rises. This regressivity is largely attributable to the structural design of the tax system, which relies predominantly on indirect taxation. A comparative analysis of the AETR across three sectors-telecommunications, a standard firm, and the gold mining industry-reinforces these findings. TELCO's AETR is higher in each studied country except in Botswana. This excessive tax burden is primarily driven by mobile-specific taxation, particularly ad quantum taxes levied on telecommunications usage, such as per-minute charges on voice calls or per-megabyte fees on data consumption. Given the sector's critical role in economic development and digital inclusion, these findings raise concerns regarding the long-term implications of such a tax structure on investment, market expansion, and consumer affordability.