Cellphone firms protest tax hike

MOBILE phone companies have protested the hike in their sector’s corporate tax to 33 percent from the normal 30 percent charged on all other companies in the country, describing the move as unfair and unjustified.

Meanwhile, Finance Minister Ken Lipenga, who announced the new tax rate on cellphone companies in his 2012/2013 budget statement to Parliament on June 8, says the tax hike was introduced in response to calls by some members of the general public during pre-budget consultations.

Speaking during separate interviews with The Business Times, senior officials at both Airtel Malawi and TNM Limited described the tax hike on their industry as counterproductive and a discouragement on further investment by their companies.

“It is unfortunate that we [ cellphone companies ] have been singled out [for the tax hike]. There is an element of discrimination here which is of concern to us as a company,” said Airtel Malawi’s Managing Director Saulos Chilima.

He described the t a x a s “punitive”, saying any proper tax regime should cut across sectors.

He said every tax on profit eats up resources meant for investment since companies use profits for expansion, not just for payment of dividends to shareholders.

Chilima disclosed that the cellphone companies, under the initiative of the Malawi Confederation of Chambers of Commerce and Industry (MCCCI), are set to meet Lipenga to discuss the matter.

“We will ask government to revise the tax,” said Chilima.

On their part, TNM Limited spokesperson Wilma Chalulu said the increase in the corporate tax for cellphone companies is not justified.

“Our capital investment is huge and this increase will have an impact on some investments that may have gone into the network. The impact may not be apparent now but certainly in the near future, this will be felt.

“As far as our profits are concerned, we are a publicly listed company, therefore all the details of our finances are reported in our annual reports,” she said.

She said as a company, they are already making a significant contribution to government coffers through taxes and levies which are already being paid.

Apart from the corporate tax, Chalulu said the company also pays a five percent levy on revenue to the Malawi Communications Regulatory Authority (Macra) as well as annual license fees.

“We a l s o s u p p o r t o t h e r industries in the country directly and indirectly in a big way. These include our distributors, security companies and the construction industr y among others,” said Chalulu.

MTL Acting Chief Executive Officer Elias Imaan said his company could not comment on the matter since it is currently not aware whether it falls into the cellphone service provider category.

Reacting to the companies’ protests, Lipenga said the current budget is mostly responding to some of the suggestions by various players including the private sector.

He said, however, the mobile phone industry should not despair since the taxes and other measures in the budget are still subject to review.

“We will always be reviewing these taxes,” he said.

Asked why the discriminatory tax was only targeted at cellphone companies and not other industries like banks which rake in even bigger profits, Lipenga said the government will in future look at other industries as well.

“We know that there are other companies in the country making huge profits and next time we will target them,” said Lipenga.