MTN passes on tax windfall

Ghana's dominant mobile operator, MTN Ghana, swiftly lowered its tariffs across its entire range of products following the recent revision of the Value Added Tax Act by the Ghana Revenue Authority (GRA). The VAT rate was reduced from 21.9 per cent to 20 per cent, primarily due to the removal of the pandemic-era Health Recovery Levy, re-coupling of health and education levies into the VAT base, and scrapping of the VAT Flat Rate Scheme.

The tax reduction resulted in a 1.9 percentage point decrease in the tax embedded in the price of daily services, including telecoms. MTN's response to the tax change was to adjust its tariffs accordingly, which led to significant savings for millions of subscribers. The company implemented the adjustments within 24 hours of the tax law taking effect, demonstrating the speed and efficiency of their systems.

MTN operates in a market structure where it is classified as a "Significant Market Player" due to its substantial market share in voice and mobile data services. Despite being subject to certain regulatory constraints, MTN's market share has continued to grow, rising to approximately 72.7 per cent for mobile voice and 79 per cent for mobile data.

The tariff cut is not solely an economic response to the tax change but also part of MTN's broader strategy to promote affordable connectivity, fostering digital adoption, financial inclusion, and enterprise growth in Ghana. While the tariff reduction benefits consumers, regulators must consider the broader market structure and the continued consolidation of MTN to determine if the current market remains truly competitive.