The use of mobile communications is a powerful economic growth engine, which governments can fuel by lowering taxes on mobile services and handsets. So says a new study by Deloitte for the GSM Association.
Deloitte reckons that in a developing country, an increase of 10percentage points in mobile penetration will lift the annual economic growth rate by 1.2 points. These are substantial figures – in an economy growing at 4% a year, a rise of the proportion of people with a mobile phone from 10% to 20% would boost the economic growth rate to 5.2% a year.
But despite the economic benefits, 16 of the 101 countries analysed in the study tax mobile services or handsets as if they are luxury goods rather than a vital means of communications. In East African countries, for example, taxes generally account for between 25% and 30% of the total cost of owning a mobile phone compared with a global average of 17.4%. In Turkey, 44% of the cost of owning a mobile phone is represented by taxes.
“Taxing mobile services and handsets as if they are caviar or champagne is counterproductive," said the GSMA’s Tom Phillips. “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."
In many cases, cutting taxes on mobile services will lead to an increase in overall tax revenues in the medium term because of the positive impact on the economy, the GSMA concluded.
Top ten taxers: Taxes as percentage of the total cost of ownership for a mobile phone
Rank - Country - Tax element
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 Republic - 26.3%
8. Ecuador - 26.2%
9. Greece - 25.6%
10. Argentina - 25.3%
But despite the economic benefits, 16 of the 101 countries analysed in the study tax mobile services or handsets as if they are luxury goods rather than a vital means of communications. In East African countries, for example, taxes generally account for between 25% and 30% of the total cost of owning a mobile phone compared with a global average of 17.4%. In Turkey, 44% of the cost of owning a mobile phone is represented by taxes.
“Taxing mobile services and handsets as if they are caviar or champagne is counterproductive," said the GSMA’s Tom Phillips. “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."
In many cases, cutting taxes on mobile services will lead to an increase in overall tax revenues in the medium term because of the positive impact on the economy, the GSMA concluded.
Top ten taxers: Taxes as percentage of the total cost of ownership for a mobile phone
Rank - Country - Tax element
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 Republic - 26.3%
8. Ecuador - 26.2%
9. Greece - 25.6%
10. Argentina - 25.3%