3GSM: Cutting mobile taxes boosts growth

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Cutting levies on mobile services and handsets could boost economic growth in developing countries and raise more taxes in the medium term, mobile industry trade body GSM Association said.

"In a developing country, an increase of 10 percentage points in mobile penetration will lift that country's annual economic growth rate by 1.2 percentage points," research undertaken by consulting firm Deloitte for the GSMA showed.

"If the proportion of people with a mobile phone in an economy, growing at four per cent a year, rises from 10 per cent to 20 per cent, that would boost the economic growth rate to 5.2 per cent a year."

High taxes typically raise the prices of calls and other services, hindering faster mobile penetration. The GSMA said cutting taxes on mobile services would boost overall tax revenues in the medium term because of its positive impact on other vital economic sectors.

The GSM Association said many developing countries imposed heavy taxes on the mobile industry, with 16 out of 101 countries surveyed in its study treating mobile services and handsets as luxury goods for taxation purposes.

"Taxing mobile services and handsets as if they are caviar or champagne is counterproductive," GSMA's chief government and regulatory affairs officer Tom Phillips said in a statement.

In East African countries, taxes account for between 25 and 30 per cent of the total cost of owning a mobile phone compared with a global average of 17.4 per cent. In Turkey, taxes account for 44 per cent of the cost, the highest in the world.

The association listed Tanzania, Uganda, Brazil, Ukraine, Zambia, the Dominican Republic, Ecuador, Greece and Argentina as some of the other countries with high taxes.

"The indirect benefits to the economy of having affordable access to telecommunications services far outweigh any short-term benefit to the budget," Mohsen Khalil, director of global information and communication technologies at the World Bank said.

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