Telecoms Ask Govt for Reduced ‘Tax Burden’, Remove Excise Duty

Rwanda's mobile telecommunications sector is advocating for significant tax reforms, specifically calling for the removal of excise duty on mobile services. A policy brief by the GSMA highlights that the sector faces a "highly complex and burdensome" tax environment, including over 30 distinct taxes, fees, and levies. The excise duty on mobile services, which is set to progressively increase from 12% to 15% by June 2027, is identified as a major impediment. This heavy fiscal burden, with an effective tax rate of 74% of pre-tax profits, is argued to stifle infrastructure investment, limit network expansion, degrade service quality, and impede digital inclusion, thereby hindering broader socioeconomic development in Rwanda.

The mobile telecommunications sector in Rwanda is sounding the alarm over what it describes as a "highly complex and burdensome" tax environment, urging the government to implement substantial reforms, most notably the elimination of excise duty on mobile services. This appeal, articulated in a recent policy brief by the GSMA, a global industry body, underscores growing concerns that the current fiscal framework is actively undermining the sector's potential for growth and its crucial role in national development. The industry contends that the multiplicity and magnitude of taxes are not merely operational challenges but fundamental barriers to investment, innovation, and the expansion of essential digital services across the country.

This development is particularly pertinent for legal professionals advising clients in the telecommunications and technology sectors in Rwanda, as it highlights a critical intersection of fiscal policy, regulatory burden, and economic development. The industry's call for reform comes at a time when digital transformation is a cornerstone of Rwanda's Vision 2050 and National Strategy for Transformation (NST2), making the efficiency and fairness of the tax regime a matter of national strategic importance. Understanding the intricacies of these tax burdens and the proposed reforms is essential for navigating the evolving legal and economic landscape for telecommunication operators and investors in Rwanda.

The Rwandan tax landscape for telecommunications has evolved significantly, with the government consistently seeking to broaden its tax base and enhance domestic revenue mobilization to fund ambitious national development goals. Historically, the country has relied on a mix of direct and indirect taxes, including corporate income tax, Value Added Tax (VAT), and various sector-specific levies. Excise duty on telecommunication services, in particular, has been a feature of this regime, with rates subject to periodic adjustments. For instance, the excise duty on telephone communications was previously at 10%.

Recent legislative changes have further shaped this environment. Law nº 011/2025, which establishes the excise duty and repeals the earlier Law nº 050/2023, is the current statutory instrument governing excise taxes in Rwanda. This law, along with its predecessors like Law No 025/2019 of 13/09/2019, has progressively expanded the scope of excise duty to include services, notably telephone communications. Furthermore, the government has recently reintroduced an 18% VAT on mobile phones and ICT equipment, which had previously enjoyed exemptions since 2010 and 2012 respectively, as part of broader tax policy reforms for the 2025-2026 fiscal year. These changes, alongside the introduction of a 1.5% Digital Services Tax (DST) on gross revenues of foreign digital platforms under Law No. 027/2022 of 20 October 2022, reflect a concerted effort to capture revenue from the digital economy and align with global taxation trends.

The core of the telecommunications sector's grievance lies in the disproportionately high and complex tax burden it shoulders. According to the GSMA policy brief, mobile operators in Rwanda are subjected to over 30 different taxes, fees, and levies, contributing to an average effective tax rate of 74% of pre-tax profits. This figure stands in stark contrast to other key sectors, such as retail finance (34%) and agro-processing (29%), highlighting a significant horizontal inequity in the tax system. A major component of this burden is the excise duty on mobile services, which is slated for a phased increase from 12% in June 2025 to 14% in June 2026, and ultimately to 15% by June 2027.

The industry argues that this escalating excise duty, coupled with other revenue-based fees like the 2% Universal Service Fund levy and spectrum fees, absorbs a substantial 37% of pre-tax profits, severely constraining operators' free cash flow. This reduction in available capital directly impacts the ability of telecom companies to invest in critical infrastructure, expand network coverage, enhance service quality, and drive digital inclusion, particularly in underserved rural areas. The policy brief emphasizes that such revenue-based fees create a "structurally rigid and more regressive tax system" that is less responsive to the capital-intensive nature and investment cycles of the mobile sector.

Comparative analysis reveals that while some African countries like Madagascar also levy excise taxes on telecom services (previously at 10%), and Tanzania at 17%, many others do not impose such sector-specific excise duties. This suggests that Rwanda's approach, especially with the increasing rates, places it among the higher-tax jurisdictions for telecommunications in the region. The government's rationale for these taxes, primarily to broaden the tax base and boost domestic revenue for national development, is understandable within the context of its Vision 2050 and NST2. However, the industry's position is that the current structure may be counterproductive, potentially hindering the very digital transformation and economic growth it aims to finance. The reintroduction of VAT on mobile phones and ICT equipment, while broadening the tax base, could further impact affordability and digital adoption, particularly for lower-income populations.

The GSMA proposes a shift towards a broad-based tax framework, advocating for the minimization or elimination of sector-specific, revenue-based fees to ensure equitable treatment of the mobile sector compared to other industries. The removal of the excise duty on mobile services is presented as a key reform that would enhance affordability, particularly for lower-income segments, and accelerate the adoption of mobile connectivity, aligning with the broader goals of digital inclusion and socioeconomic development.

The ongoing dialogue between the Rwandan telecommunications sector and the government regarding the "tax burden," particularly the excise duty on mobile services, presents a critical juncture for the nation's digital agenda. The industry's compelling arguments, supported by data on high effective tax rates and the adverse impact on investment and service expansion, necessitate a careful re-evaluation of the current fiscal policy. While the government's objective of robust domestic revenue mobilization for national development is laudable, the method of achieving this should not inadvertently stifle a sector vital for that very development.

Practitioners advising telecommunication companies and investors in Rwanda should closely monitor legislative and policy developments stemming from this advocacy. The potential for a shift towards a more equitable and broad-based tax framework, including the possible reduction or removal of sector-specific excise duties, could significantly alter investment strategies and operational costs. Engagement with the Rwanda Revenue Authority and the Ministry of Finance and Economic Planning on these issues will be crucial. Furthermore, understanding the interplay between excise duties, VAT reintroductions, and the new Digital Services Tax will be paramount for comprehensive tax planning and compliance in this dynamic regulatory environment. The outcome of these discussions will not only shape the future of Rwanda's digital economy but also set a precedent for how African governments balance revenue needs with sector-specific growth imperatives.