Mobile phones are revolutionising the lives of millions of people and will continue to be the primary means for the majority to access voice, data and internet services.
Taxation policy and levels have a direct effect on how this essential franchise is extended to the poorer sections of society. Tax regimes that recognise mobile phones as a need not a luxury benefit all stakeholders.
Policy recommendations for developing countries
Currently mobile subscriber growth rates are on the increase in India, China and Pakistan and particularly high in Africa. This continued growth can be explained by a number of factors, including the low cost of network rollout compared to fixed-line alternatives, a continued drop in handset and service costs and widespread access to pre-paid services.
Despite this continued growth, much still needs to be done. The GSMA is working actively in developing markets to assist in the development of regulatory frameworks which will tackle the cost barriers to ownership and support mobile growth.
The impact that mobile communications is having on economic and social development is akin to that of other major enabling infrastructure like roads, ports and railways. All stimulate trade, create jobs, generate wealth and enhance social welfare.
Despite the positive impact of mobile communications a small minority of countries impose a sector specific tax on mobile usage. The excise duty restricts the affordability of mobile services for many millions of people.
A substantial number of these are located in the East African community. While the majority of African governments levy luxury taxes on air time, handsets and equipment, these taxes are borne by consumers and have a negative impact on affordability. They are also regressive in nature, penalising poorer sections of society.
By lowering and removing mobile specific taxes from the mobile sector, governments will see an incremental increase in tax receipts as millions more people will be able to afford to connect to and use mobile services. This is because a cut in mobile services taxes would lead to a reduction in tariffs, which would then boost usage of mobile services. Greater usage of mobile phones improves communication between businesses and their customers, fuelling economic development and lifting tax receipts from across the wider economy.
Policy best practice
In many developing markets, including Thailand, Bangladesh, Pakistan and Kenya, governments have lowered or removed mobile-specific taxes, to the benefit of consumers, private enterprise and governments. The GSMA encourages governments in East Africa to do likewise, as the indirect benefits to the economy of having affordable access to telecom services far outweigh any short-term benefit to the budget.
A best practice regulatory environment can significantly increase investment in mobile networks and boost mobile penetration and usage. Individual consumers and society both benefit when there is a regulatory framework exists where the mobile sector can thrive and continue to make a vital contribution to the development of economies and societies. The long-term winners will be those countries whose governments set in place sound regulation of the mobile sector.