Telcos deny under-declaring revenue, expose propaganda

Over the past few months there have been reports in sections of the media that four telcos in the country have been hiding revenue to evade taxes, but three of the telcos have variously described those reports as false, malicious, irresponsible, disappointing and disingenuous.

Media reports sourced audit reports from various independent audit firms commissioned by the National Communications Authority (NCA) in 2013 to look into the records of telecom operators in the country between 2009 and 2011.

The audit reports supposedly showed among other things, some disparities in what the telcos paid to NCA and what the auditors found. It also showed that some telcos charged less than the legally mandated 19 cents per minute of incoming international call from some countries, but still paid out government's 6 cents per minute.

Specifically MTN, Vodafone, Airtel and recently Tigo were mentioned in that report.

A section of the media have since gone to town reporting that telcos hid revenue from government and thereby evaded taxes.

Curiously however, no government official nor the industry regulator NCA itself has made any public pronouncements on whether indeed the telcos hid revenue as is being reported in sections of the media.

Three of the four telcos implicated in those media reports have since issued separate statements explaining what happened.

MTN
Market leader MTN was fined over $9.8million for charging less than the stipulated 19 cents per minute of incoming international call from countries in West Africa. The fine was because MTN was bound by law (Electronic Communication Amendment Act, Act 786) to charge not less than 19 cents per minute but it broke that law.

MTN has since explained that it deliberately sacrificed part of its share of that money on traffic from West Africa because it wanted to promote trade within the sub-region through affordable communication.

But even though it charged less than 19 cents per minute, it still paid government's share of 6 cents for every minute of those calls over the period under review. And the audit report never said MTN did not pay government's share, so the question of under-declaring revenue is nothing but false.

Vodafone
Vodafone was initially fined over $20 million for an alleged similar offense, but the fine was reduced to ghc22million instead.

But Vodafone has also explained that it did charge 19 cents all right, as the law requires, but used part of its 13 cents share of that money to pay handling charges to some overseas agencies who secured the traffic on their behalf, and prevented those traffic from going to SIMBOX fraudsters.

They explained that, like MTN, they also made sacrifices on their share of the money to prevent SIMBOX fraud, and now they are rather getting punished for making sacrifices to stop fraud.

Indeed, Vodafone is said to had initially wanted to go to court at the instance of their lawyer and board member (name withheld). But the management of the company preferred to let sleeping dogs lie. However, information from the grape vine says some of the telcos might go to court on this matter soon.

Tigo
Tigo Ghana was the most recent to have suffered from the media bashing for allegedly under-declaring revenue at the international front and refusing to allow Subah Infosolution to verify its domestic revenue flow.

But the telco says the charge is "false, malicious, irresponsible and disappointing."

Tigo explained that whereas the audit largely passed its revenue declaration practices as correct, it's only liability resulted from the auditor's re-calculations and the treatment of adjustments passed in its financials and reconciliations.

"However this was of no material significance and has since been settled in full to the NCA, (GH₵ 208,495 (approx. $90,000) in regulatory fees and $50,000 on International Incoming Traffic," it said.

Tigo was reported to have paid a total of US$258,452 including penalties.

Airtel was fined almost $3 million but they have remained completely silent on the matter as usual. Airtel usually steers clear of public confrontation with anything that has a semblance of regulator or government.

The law
Meanwhile, the law under which the telcos were found guilty of under charging for incoming international traffic, has itself been criticized as a major incentive for SIMBOX fraud.

The law insists on telcos charging not less than 19 cents per minute of incoming international calls, but SIMBOX fraudsters are charging much less so international wholesale carriers abroad prefer to give traffic to the SIMBOX operators than to the telcos directly.

Telcos have asked for the 19 cents floor price to be removed to kill simboxing. Their main contention is that the huge difference between the 19 cents (68Gp) and local call rates, which is up to only 15Gp (4.2cent) gives SIMBOX fraudster about 15 cents to play with.

But the regulator believes proper SIM registration and vigilance on the part of the telcos, and real time monitoring and verification of traffic among other measures are rather effective tools for fighting simboxing.

The regulator posits that the 19 cents was not an imposition on telcos, but rather the lower arm of a proposal from overseas for developing countries to choose anything between 19 cents and 25 cents as minimum incoming call rates.

Ghana chose 19 cents but other countries chose 25 cents. But some countries chose none, arguably because, unlike Ghana, their local populations were and are enough for them to make enough from their respective domestic markets.