IMPROVING AFFORDABILITY could unlock digital inclusion and sustain the growth of mobile broadband, especially in emerging economies where sector specific taxation is creating barriers to access.
Mobile services are bringing wide ranging benefits to countries worldwide, with 3.4 billion unique mobile subscribers. The growth of the sector has enabled access to information and communications technology for many, promoting the dissemination of information and ideas, increasing productivity and ultimately delivering economic and social growth.
However, barriers to extending access to mobile broadband services remain, especially in developing countries, where affordability is a key problem. Taxation that affects mobile services disproportionately compared with other services can increase these barriers and impact both affordability and the incentives to invest in network rollout. A balanced tax structure lowers barriers to affordability and increases network investment, promoting mobile penetration. This brings economic and infrastructure development and increases productivity and employment across the economy.
Increased mobile penetration delivers positive effects on education, health care and overall development. Increased sector and economic growth throughout the economy could result in increased tax revenue for the government. Across 26 selected countries (Nigeria, Panama, Uruguay, Ecuador, Peru, Sri Lanka, Croatia, Chad, South Africa, Chile, Kenya, Hungary, Thailand, Egypt, Colombia, Cameroon, Tunisia, Pakistan, Gabon, Jordan, Brazil, Bangladesh, Tanzania, Ghana, Jamaica and Turkey) the total tax and fee payments from the mobile sector amounted to US$39 billion in 2013, while market revenues were US$117.5 billion.
In the mobile industry, total tax payments and fees are estimated to represent more than a third of market revenues for 11 of the 26 countries surveyed. Total mobile tax payments from taxation on both consumers and operators are estimated to range from 10.6 per cent as a proportion of market revenues in Nigeria to 58.3 per cent in Turkey.
Especially in emerging markets, tax payments from mobile operators and consumers provide a significant contribution to public revenues. Mobile operators and consumers face numerous industry specific taxes and fees, which make their contribution to overall government revenues higher than most other industries.
Mobile specific payments made by operators include regulatory fees, such as the universal service fund contribution and recurring spectrum fees, special revenue or profit taxes on mobile and import duties on network equipment. The costs borne by consumers in order to own and use a mobile phone include expenditure on calls, text messaging and data, as well as activation and handset costs, and can be expressed as the total cost of mobile ownership (TCMO). Each of these cost elements is subject to taxation; this review estimates that in 2014 taxes applied directly on mobile consumers represented 20 per cent of TCMO across 110 countries surveyed. This measure takes charged directly by governments on mobile devices and services, like VAT, customs duty on handsets, and luxury taxes on mobile usage; it does not reflect any operator taxes or regulatory fees which may be passed onto consumers.
If the passthrough of operator taxes onto consumers is taken into account, the mobile consumer tax burden could be higher in some countries. The importance of the mobile industry in contributing to government revenues is recognised.
However, a more equitable and balanced taxation structure could benefit the economy as a whole and support growth and fiscal stability in the medium term. The transition to a balanced taxation on mobile, in line with that applying to standard goods and services, could boost digital inclusion and broadband penetration and further enhance the industry’s contribution to economic and social development.
This information was taken from the report Digital Inclusion And Mobile Sector Taxation 2015, produced by Deloitte LLP on behalf of the GSM Association
