Lower mobile taxes boost usage and growth – Study
Jonah Iboma
Increased access and usage of mobile communications provide a powerful economic growth engine, which governments can fuel by lowering taxes on mobile services and handsets, according to a new study undertaken by Deloitte for the GSM Association.
The GSMA is the global trade association representing 700 GSM mobile phone operators in 217 countries of the world. In addition, more than 180 manufacturers and suppliers support the association’s initiatives as key partners.
The report issued by the association last week, found that in a developing country, an increase of 10 percentage points in mobile penetration would lift that country’s annual economic growth rate by 1.2 per centage points.
GSMA stated that this situation represented a major uplift - if the proportion of people with a mobile phone in an economy, growing at four per cent a year, rose from 10 per cent to 20 per cent, that would boost the economic growth rate to 5.2 per cent a year.
According to the study, despite the evident economic and social benefits of mobile communications, 16 of the 101 countries analysed in the study taxed mobile services or handsets as if they were luxury goods, rather than a vital means of communications.
It said that in East African countries, taxes generally accounted for between 25 per cent and 30 per cent of the total cost of owning a mobile phone compared with a global average of 17.4 per cent. The highest tax, however, is in Turkey, where 44 per cent of the cost of owning a mobile phone is due to taxes.
The Chief Government and Regulatory Affairs Officer of the GSMA, Tom Phillips, condemned the development and asked the effected governments to make changes to their tax laws.
He said, "Taxing mobile services and handsets as if they are caviar or champagne, is counter-productive.
"This study adds to the growing weight of evidence that growth in mobile services is a fundamental requirement for economic growth delivering swift and efficient communications.
"Governments should recognise this and adjust their tax policies to encourage, rather than constrain, mobile usage."
GSMA noted that in many cases, cutting taxes on mobile services would lead to an increase in overall tax revenues in the medium term because of the positive impact on the economy, the GSMA concluded.
Prof Leonard Waverman, of the London Business School and one of the first experts to quantify the link between mobile penetration and economic development, said that the impact that mobile phones had on the developing world was as revolutionary as roads, railways and ports, increasing social cohesion and releasing the entrepreneurial spirit that stimulated trade and created
Countries with the highest levels of taxes
Country Taxes % of TCO
1. Turkey 44.6%
2. Tanzania 29.4%
3. Uganda 29.2%
4. Brazil 28.0%
5. Ukraine 26.7%
6. Zambia 26.4%
7. Dominican Rep 26.3%
8. Ecuador 26.2%
9. Greece 25.6%
10. Argentina 25.3%
Increased access and usage of mobile communications provide a powerful economic growth engine, which governments can fuel by lowering taxes on mobile services and handsets, according to a new study undertaken by Deloitte for the GSM Association.
The GSMA is the global trade association representing 700 GSM mobile phone operators in 217 countries of the world. In addition, more than 180 manufacturers and suppliers support the association’s initiatives as key partners.
The report issued by the association last week, found that in a developing country, an increase of 10 percentage points in mobile penetration would lift that country’s annual economic growth rate by 1.2 per centage points.
GSMA stated that this situation represented a major uplift - if the proportion of people with a mobile phone in an economy, growing at four per cent a year, rose from 10 per cent to 20 per cent, that would boost the economic growth rate to 5.2 per cent a year.
According to the study, despite the evident economic and social benefits of mobile communications, 16 of the 101 countries analysed in the study taxed mobile services or handsets as if they were luxury goods, rather than a vital means of communications.
It said that in East African countries, taxes generally accounted for between 25 per cent and 30 per cent of the total cost of owning a mobile phone compared with a global average of 17.4 per cent. The highest tax, however, is in Turkey, where 44 per cent of the cost of owning a mobile phone is due to taxes.
The Chief Government and Regulatory Affairs Officer of the GSMA, Tom Phillips, condemned the development and asked the effected governments to make changes to their tax laws.
He said, "Taxing mobile services and handsets as if they are caviar or champagne, is counter-productive.
"This study adds to the growing weight of evidence that growth in mobile services is a fundamental requirement for economic growth delivering swift and efficient communications.
"Governments should recognise this and adjust their tax policies to encourage, rather than constrain, mobile usage."
GSMA noted that in many cases, cutting taxes on mobile services would lead to an increase in overall tax revenues in the medium term because of the positive impact on the economy, the GSMA concluded.
Prof Leonard Waverman, of the London Business School and one of the first experts to quantify the link between mobile penetration and economic development, said that the impact that mobile phones had on the developing world was as revolutionary as roads, railways and ports, increasing social cohesion and releasing the entrepreneurial spirit that stimulated trade and created
Countries with the highest levels of taxes
Country Taxes % of TCO
1. Turkey 44.6%
2. Tanzania 29.4%
3. Uganda 29.2%
4. Brazil 28.0%
5. Ukraine 26.7%
6. Zambia 26.4%
7. Dominican Rep 26.3%
8. Ecuador 26.2%
9. Greece 25.6%
10. Argentina 25.3%
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