MEDIA RELEASE PR 40483
Taxes Must Be Aligned to ICT Policy Goals to Drive Mobile Broadband Adoption
LONDON, July 21 /PRNewswire-AsiaNet/ --
A Telecom Advisory Services (TAS) report, delivered in conjunction with the GSMA today,
reveals how mobile sector-specific taxation is impacting on the development and deployment of
Mobile Broadband in developing countries. The study indicates how a reduction in special taxes
applied to the telecommunications sectors in countries with different taxation approaches like
Brazil, Mexico, Bangladesh and South Africa will translate into higher Mobile Broadband service
adoption and more wealth creation reflected in additional GDP growth.
Inconsistencies currently exist in many developing countries between the levels of taxation
levied against the Mobile industry and the reliance each of these countries place on Mobile
Broadband to achieve broadband penetration goals. With a widespread absence of fixed
infrastructure in these markets,
Mobile Broadband will become a key social and economic development lever, driving internet
connectivity and bridging the existing digital divide. As today's report reveals, every dollar
reduced in taxes across Brazil, Mexico, Bangladesh and South Africa will generate additional
GDP ranging between US$1.4 to US$12.6 through enhanced broadband uptake. Despite this
however, all four countries have implemented a taxation approach that actively reduces Mobile
Broadband penetration by putting an economic burden on the purchase of handsets and services.
"The findings from today's report clearly show how distortive taxation approaches in some
countries can increase the Total Cost of Mobile Ownership (TCMO), negatively impacting
development of Mobile Broadband," said Tom Phillips, Chief Government and Regulatory Affairs
Officer at the GSMA. "This
report highlights the inconsistencies between regulations aimed at developing ICT sectors and
policies that single out the services they deliver as "cash cows" upon which taxes are levied."
The study authored by renowned experts Dr. Katz, Dr. Flores-Roux and Dr. Mariscal states
that at least twenty-seven countries around the globe have special taxes focused on
telecommunications services. While it is imperative that governments apply taxes to finance
spending and generate externalities in sectors where private investment is lacking, these taxation
models are often extremely inefficient. Fiscal policies that apply a special tax to the
telecommunications sector cause distortions that "crowd out" private spending and ultimately
diminish welfare.
"It is crucial that policy makers in these countries understand the impact Mobile Broadband will
have on wealth creation, and align their ICT development strategies to sustain its ongoing
growth", said Mr. Phillips.
The full report can be found via the following link: TAS Report
TAS Report highlights - Bangladesh:
-
For every dollar that taxes are reduced over the 5 year period ending in 2014, 0.6 to 4.5 dollars
will be created in additional GDP.
-
The effect of lowering taxes on Total Cost of Mobile Ownership from the current 54.8 to 53.8%
will have the following cumulative effects:
-
Additional penetration: 0.1%-0.2%, representing 1.9%-3.9% additional subscribers (or 137,000-
277,000)
-
Wealth creation (additional GDP): $11.4 million-$53 million (0.01-0.04% additional GDP by
2014)
-
Accumulated loss/gain in tax collection: on the most conservative case, loss of $ 21 million; on
the most positive case, $ 5 million
-
Bangladesh levies 15% VAT, 35% Other Tax and a $11.76 Fixed Tax on telecom services, and
15%
-
AT, 12% Customs Duty, and a $11.63 fixed tax on handsets
-
Bangladesh's Taxation Approach is characterized as "Tax Maximization and Sector Distortion",
implicitly recognizing the wireless industry as a primary source of revenues for the treasury and
attempts to recover high taxes on both handsets and services, regardless whether this might
have a negative impact on service diffusion or introduce sector distortion
About the GSMA
The GSMA represents the interests of the worldwide mobile communications industry.
Spanning 219 countries, the GSMA unites nearly 800 of the world's mobile operators, as well as
more than 200 companies in the broader mobile ecosystem, including handset makers, software
companies, equipment providers, Internet companies, and media and entertainment
organisations. The GSMA is focused on innovating, incubating and creating new opportunities for
its membership, all with the end goal of driving the growth of the mobile communications industry.
For more information, please visit Mobile World Live, the new online portal for the mobile
SOURCE: GSMA
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