Job losses imminent as phone tax bites importers, distributors

Mobile phone dealers in the country have started laying off some of their employees and reducing the sizes of their businesses in a bid to contain the effects of the 20 per cent import duty imposed on handsets.

Some importers and distributors of the handsets have also started repatriating their consignments to avoid paying more money to clear them from the various points of entries.

The repatriation has reduced the amount of phones available for sale and  this could fuel smuggling of the devices through unapproved routes into the country.

Phone tax

In August this year, the government slapped a 20 per cent import duty on each mobile phone imported into the country. The implementation of the tax adds to the seven per cent ECOWAS levy and 15 per cent VAT charged on every imported item.

This brings to about 43 per cent, the total amount an importer must pay on each device.

But that is not small money, says Mr Arkhta Khan, whose company – Medicom – has reduced its monthly import of phones in the wake of the new tax.

Medicom Ghana is the sole importer and distributor of Nokia handsets in the country.

“We were importing about 100,000 pieces of phones on monthly basis but since August, we haven’t ordered for any consignment. The stock we have is not even moving and the consignment we ordered before the tax is also yet to be cleared,” its country manager told the GRAPHIC BUSINESS on October 1.

A visit to the cargo section of the Kotoka International Airport (KIA) in Accra showed loads of boxes of mobile phones which workers there said were to be sent back to their country of origin.

According to the workers, the frequency at which mobile phones were imported into the country had also dropped following the implementation of the tax.

The Spokesperson of the Mobile Phones and Accessories Dealers Association, Reverend Abra, added that about 1,000 people were clearing handsets on daily basis but that has now reduced to about seven

“This means that the government is losing even the small amount it was making from the previous regime,” he noted.

According to a  senior customs official at the KIA the  volumes have actually reduced. It started dropping about two months ago when the tax was implemented for the first time.

Job losses

Medicom has already sent home about 100 people as it struggles to cut back on expenditures in the midst of the new taxes.

The company has about 75,000 handsets locked up at the airport and is now weighing the options of either clearing them and later passing on the extra cost to the consumers or returning them to avoid incurring that cost.

Its Country Manager said returning the consignment was high on Medicom’s agenda.

“That cargo has been there for the past two months and I’m now thinking of shipping it back to the country of origin. If I clear, then it means I'm going to make losses but we are not here to make losses,” he said.

Shareholders of I-zone Ghana Limited, a major wholesaler and retailer of mobile phones, have also directed management to find ways of mitigating the impact of the tax on the business or start a downsizing that could send about half of the company’s 400 employees home.

I-zone's Chief Executive Officer, Mr Joseph Okona-Dedey, told the paper that the company’s fortunes have  shrunk by half following the implementation of the tax.

“Immediately the tax took effect, the business started dipping. It was just like the whole company was crashing,” he said.

Although I-zone was making about GH¢300,000 a week  in 15 sales outlets nationwide, Mr Okona-Dedy said it was now struggling to make even half of that in its current 45 outlets.

“We have lost about 50 per cent of our business in just three months and shareholders are asking us to revive the business or close down some of the outlets and send the people home,” he said.

Phone prices up

The implementation of the tax has pulled prices of the devices up.

A visit to the Tiptoe Lane at the Kwame Nkrumah Circle, Accra, revealed that handsets that were selling at GH¢100 are now going for about GH¢150 while those that were traded at GH¢1,450 have been increased to over GH¢2,000.

The increment is as a result of the importers to clear their devices and that has trickled down to wholesalers and retailers of the devices.

I-zone, which said it was buying over 2,000 pieces of phones in a week to wholesale and retail, has since August ordered for only 110,00 pieces.

“Even that one is sitting in the shelves and no one is buying because of the increase in prices. We were even forced to sell some at cost to be able to clear them” the company’s Business Development Manager, Mr Kwesi Ntiri Owusu, said in an interview.

The phone dealers and importers thus appealed to government to help reverse the tax, explaining that such a move will prevent them from closing down and moving to other countries.

By Maxwell Adombila Akalaare/Graphic Business/Ghana