Taxes that target the mobile communications sector hamper mobile broadband...
Taxes that target the mobile communications sector hamper mobile broadband rollout, the GSM Association said Wednesday. It examined the tax policies of developing countries Malaysia, South Africa, Mexico, Bangladesh and Brazil, where fixed broadband is significantly undeveloped and governments are…
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looking to mobile broadband to address the digital divide and boost economic growth. Despite the critical importance of wireless broadband to their economies, all countries except Malaysia have a tax approach that reduces its penetration potential by imposing an additional financial burden on the purchase of handsets and services, the GSMA said. Besides a value-added tax, all four levy a customs duty on handsets; Mexico, Bangladesh and Brazil tax service; and Brazil and Bangladesh also tax handsets, it said. Based on various economic models, the GSMA estimated that for every dollar that wireless and non-wireless-sector taxes are reduced over the five years ending in 2014: (1) Mexico will see up to an additional 600,000 mobile subscribers and as much as $2.4 billion in added Gross Domestic Product. (2) Brazil’s subscriber base will grow by over 1 million, with wealth creation of up to $3.4 billion. (3) South Africa could see up to 620,000 new subscribers and an additional $1.34 billion GDP. (4) The number of Bangladeshi subscribers could grow by 277,000, with up to $53 million additional GDP. (5) Malaysia will have up to 530,000 new subscribers, with as much as $1.44 billion added to the GDP. The implications for fiscal policy are clear, the GSMA said. While it’s “imperative” that governments use taxation to finance spending and generate activities in sectors where private investment is lacking, these tax regimes are often inefficient. Developing countries in particular face high public funds costs because they have distorting tax systems, it said. Putting special taxes on the telecom sector discourages private spending and diminishes welfare, it said. Many countries have policy inconsistencies between regulations aimed at developing the information and communication technologies sector through investment incentives and a culture where ICT companies are perceived as “cash cows” on which taxes are levied, it said. These nations must align their ICT strategies to sustain the ongoing growth of the mobile sector, the GSMA said.