This week, the Minister of Communications was summoned before Ghana’s Parliament to answer very important questions and doubts IMANI, over 25 civil society and think tank leaders and many Ghanaians raised about a $178 m contract to an ‘unknown’ company beyond its name, KelniGVG.
[ads1]Unfortunately, the minister only repeated all the claims the ministry has made for and on behalf of KelniGVG which have been roundly questioned.
For the sake of emphasis, we have itemized 14 main issues and have provided further clarity and solutions where necessary. We have also debunked two false claims made against IMANI. Please take a read.
1. “Industry scale tax evasion” is not something that any serious country measures by gut instinct. In the telco industry there are sophisticated methods for doing that. You take the average tariff per second, the average revenue per user in the industry, and the country’s GDP and benchmark against other countries far and wide. That is how you start to build a credible case about the “extent” and therefore the “risk” that telcos are hiding significant amount of monies. If compared to other countries of the world, taking into account economic differences, the telcos in Ghana are reporting revenues per users that sound reasonable, then there is a high risk that monitoring would not bring in significant revenues and thus the amount of money spent on trying to look for more revenue need to be kept at a minimum. When the analysis is conducted taking tariff levels and GDP into account, Ghanaian telcos are already reporting very high average revenues per user, with MTN reporting about $50 dollars per subscriber.
2. The point is not to insist that the telcos are saints. The point is that a risk assessment should have been commissioned to ascertain the degree of tax evasion going on in order to determine how much would be justifiable to spend trying to uncover wrongdoing. There is no point throwing away hard-earned tax money after phantom projects that don’t generate any additional income. In fact, we know for sure that since 2007 to date, no monitoring that has been done has been shown to raise revenue.
3. The amounts that are being bandied around as mobile money related tax revenue that the monitoring is supposed to come and protect is sheer nonsense. MTN makes more than 90% of revenue in the mobile money sector. Last year it made about $108 million. If government takes even 6% of that in taxes, as it does with voice revenues, we are talking of less than $8 million per year. There is a lot of pure confusion about what really is happening in the telco sector.
4. The telecom industry generates less than 3% of Ghana’s GDP (money) but they pay roughly 35% of all corporate taxes in the country. If they are hiding money then other industries are hiding far more.
5. If so, why do we spend $125 million through the Ghana Revenue Authority (GRA) to collect, monitor, and assure all the $7.5 billion we collect, and around $25 million to collect, monitor and assure all the $1.23 billion we collect in taxes from companies in Ghana, but want to burn nearly 40 cedis in every 100 cedis we collect in communications services tax? What is the logic?
6. If we run a KelniGVG type monitoring system, at a similar cost, for all industries in Ghana, we would be spending $3 billion yearly just to monitor taxes. The country would literally collapse.
7. There is no way any company can independently plug into the physical network of the telcos to monitor calls without listening to the calls. To plug into the physical network means literally going to the base station controllers and inserting probes into physical switches. This would be a mindless enterprise. It would amount to building a mini-telco. And it would be needless as call traffic is not the same as revenue. Every missed call is traffic, but most are not charged.
8. This means any connection must be to the virtual platform that the telcos use to control the physical network, the so-called Intelligent Network (IN) platform. This is software that the telcos buy from vendors. That is where they themselves collect data to generate the records (CDRs) for their own billing. This is where GVG wants to plug in. This is needless. GVG doesn’t make IN software. The telcos’ vendors configure these platforms. GVG can just connect via an interface provided by the telco. GVG does not have access to the source code of these systems. It gets records of calls that have yet to be charged. But in the end the charging process is still done by the telcos. So what is the difference between getting the IN communications and simply collecting the final records that have been charged (the CDRs)? “Real-time monitoring” is merely pointless jargon. Unless we take the telcos over and run them or we start building complex software and force them to use it, there is always a point where we have to rely on the telcos to tell us what they billed and how much. Plugging into anything lower than the billing system therefore has nothing to do with tax. It is purely about surveillance.
9. Why should we trust KelniGVG, with all its obscurity or its foreign sponsor, GVG, with its scandals all over the place (troubles in Tanzania, Uganda, Liberia etc.) to monitor MTN, a listed company with much more to lose if they lie and are caught?
10. But even if we really wanted to prevent the telcos from cheating on taxes, all we need to do is collect the CDRs, which are like “bank statements” but with telephony rather then banking transaction records. Once we have the CDRs we can use a system that generates random calls to check if those calls appear in the CDRs. IMANI has described such a system, specified it, and cross-checked it with telecom engineers publicly on Facebook. The cost is $55,000. This actually does catch fraud if there is any.
11. Many companies in Ghana are monitored for tax compliance using standard approaches like site visits (GRA and NCA can go to the telcos unannounced and supervise retrieval of CDRs intermittently, for instance), bank statement (every money the telcos make go into their bank statements) reconciliations etc. No one is saying tax assurance isn’t a good thing. That would be a false claim. But tax assurance is something that every company is expected to go through anyway. We only object to this by-force approach of asserting without evidence that the telcos are special kinds of thieves that warrant some special gadgetry to monitor their tax compliance, when we are already paying all manner of technical agencies to just do their work.
12. In the current model, the government itself has no real way to check if KelniGVG is lying to them or not. The approach of monitoring nodes of the IN for call traffic analysis is opaque to Government. So in the end everything boils down to whether KelniGVG can be trusted. Yet, the company was selected through a restricted tender process with zero transparency. The company doesn’t seem capable of even managing its own website and email. What really then is the government’s justification of putting their trust in them?
13. Why is that in the oil and gas sector we manage our own flow meters at a cost of 1% of what we want to use to monitor telcos even though the revenue at stake that can be measured through monitoring is more than 8 times what we are dealing with as far as communications service tax is concerned. ‘
14. 80% of the telcos’ revenues cannot be monitored at all through this KelniGVG method as they are EBITDA revenues. We monitor that through the standard GRA process. Why should we be satisfied monitoring 80% of the revenues in the standard way and yet we want to pay $178 million over 10 years on the 20%. This is clueless policymaking.
Debunking Two False Claims
A. That IMANI is clueless –
Well for those who believe the ruse that IMANI folks know nothing about telcos, please bear in my mind that IMANI’s three most senior colleagues executives have the following experiences:
Selorm Branttie is a certified IT practitioner who has taught the subject for 7 years. Bright Simons sat on the Global Agenda Council on Data and telecoms for 6 years. That’s one of the world’s most eminent ICT expert panels. He has done keynotes at the International Telecommunication Union. Kofi Bentil was an IT projects manager for 5 years and was part of the first team to install fibre optics for Stanchart in Ghana.
B. We are taking money from the telcos.
We take serious offence at such lame provocations. Why would we come up with a more clever model for monitoring telcos if they were indeed sponsoring us? At any rate the Ministry says the telcos are enthusiastic about this KelniGVG deal. How can they both be enthusiastic about it and also be funding IMANI to oppose it? They said it is the telcos themselves who proposed this arrangement in March 2017. Why would the telcos pay us then? The current board chairman of the telecom regulator, Mr. Kwaku Sakyi Addo used to work for the telcos. The deputy minister and minister of the ministry of communications used to work for the telcos as PR executives until they entered politics. We are daring all of them to put out any evidence they have of a single cedi any telco has paid us to resist any monitoring since this funny monitoring idea started gaining ground in 2007 in this country.