Financial analyst Deloitte has revealed the countries whose rates of taxation, direct or indirect, on mobile communications are the highest in the world. Heaviest tax is in Turkey, where the taxation rate as a cost of mobile ownership is over 2.5 times the global average. Deloitte's report, commissioned by the GSMA, is summarised in this critical review.
The GSMA's enthusiasm for low-tax regimes as method of boosting mobile ownership and thus in turn boosting economic growth, is well known. Latest chapter in the Association's campaign is the publication of a report it recently commissioned from worldwide financial analyst and accountancy practice Deloitte. Developing Telecoms is now publishing the survey's top ten "roll of shame."
Deloitte's study reinforces previous GSMA research, which concludes that 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. For example, if the proportion of people in an economy with a mobile phone grows at 4% a year, then rises from 10% to 20% will boost the economic growth rate to 5.2% a year.
One phenomenon noted by Deloitte in 16 of the 101 countries reviewed is that a mobile phone is regarded as a luxury item - this despite the proven empowerment that mobile communications can bring. Tom Phillips, the Chief Government and Regulatory Affairs Officer of the GSMA is quick to support Deloitte: "Taxing mobile services and handsets as if they are caviar or champagne is counterproductive...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."
As mentioned earlier Deloitte has compiled a list of the ten leading offenders. The breakdown is strange in that one country leads the rest of the pack by a long way but those left in the "leader's" wake are from two totally unconnected regions.
And the top offender? Well, despite the country's healthy economic growth overall, it's Turkey, where 44% of the cost of owning a mobile phone is due to taxes. In fact, Turkey leads the way by a long margin in global and to some extent regional terms.
Following Turkey in second place is Tanzania, where taxes make up 29.4% of ownership costs. East Africa provides three of the six worst offenders, as Uganda follows in third place with a close 29.2% and Zambia comes in sixth with 26.4%.
And if East Africa appals you, then you only have to look at Central and South America. Brazil taxes at 28% in fourth place, Dominican Republic takes 26.3% (7th), Ecuador 26.2% (8th) and Argentina makes up the top ten at 25.3%
If you do wish to escape from Turkish taxation tyranny, you will be wasting your time crossing the Black Sea to Ukraine (26.7%, 5th) or negotiating the border with Greece: the messenger of the gods, Hermes, would not just have to sacrifice an animal to Zeus but also (9th place) in tribute to the Athenian authorities.
The GSMA also revealed that twenty states impose higher taxes on mobile communications than they do on fixed communications even though the United Nations, the World Bank and other international development organisations regard mobile communications, not fixed, as the most cost-effective way to connect people in the developing world.
"We believe that any taxation policy should be designed in a way that does not add any further barriers to access and add to the cost of service provision for the poor," said Mohsen A Khalil, Director of Global Information and Communication Technologies, World Bank. "The indirect benefits to the economy of having affordable access to telecommunications services far outweigh any short-term benefit to the budget."
Deloitte partner Dennis Knowles added: "We would urge Governments and mobile operators to work together to determine the economic impact of the sector, the ideal tax mix and how these combine to meet the objectives of the country."