September 26, 2020

Gov’t announces reduction in ‘Talk Tax’ from 9% to 5%

As part of efforts to mitigate the economic impact of the novel Coronavirus pandemic on Ghanaians, government has announced a reduction in the Communication Service Tax, CST, also known as ‘Talk Tax’ from nine per cent to five per cent.

This was announced by the Minister of Finance, Ken Ofori-Atta, when he presented the 2020 mid-year budget review to Parliament on Thursday, July 23, 2020.

He stated that the reduction, which will take effect from September, 2020, will help reduce the cost of communication services to the consumer as more people work remotely and utilize online services due to COVID-19.

“Mr. Speaker, with the policy to promote digitalisation as a major policy intervention in the Ghana CARES Programme to catalyse economic activities and promote growth, as well as the increasing use of communication services as a result of the impact of the COVID-19 pandemic, it is proposed that the Communication Service Tax be reduced from 9 percent to 5 percent, effective September 2020. It is anticipated that this policy measure will provide some relief to households and businesses in the procurement of communication services such data and airtime as part of measures to mitigate the impact of the COVID-19 pandemic and promote digitalization,” he said.

He further noted that, “We will count on the Telcos to match this reduction in the CST by reducing their tariffs. This is important for our youth, entrepreneurs and the burgeoning FINTEC industry.”

Following the outbreak of the novel Coronavirus pandemic, several governments globally are already taking steps to support individuals and businesses to mitigate its impact.

In some cases, governments elsewhere are offering enhanced social support services to make life less stressful for people.

Background of CST

The Communication Service Tax (CST) was introduced in 2008 at an ad valorem rate of six per cent. The tax is levied on charges payable by consumers for the use of communication services.

In 2018, the tax brought in a total of GH¢420 million, representing a 27.7 per cent increase from the estimated ¢304 million accrued in 2017.

The amount generated from the levy was 4.56 per cent more than the projected ¢401.8 million in the 2018 mid-year budget.

However, government in the main budget for 2020 delivered in November 2019, amended the CST Act, increasing it from six percent to nine percent. It took effect from October 1, 2019.

This led to increased agitation among many customers of mobile telecommunication companies, who changed the mode of application that angered government.

But following a directive from the Ministry of Communications, upfront talk tax deductions were ceased.

Source: Business