As countries battle with the coronavirus outbreak, governments around the world are taking unprecedented fiscal and economic measures to support their economies. Recognising the critical role of digital technologies in keeping people connected, enabling business continuity, and preventing service interruptions, many governments are implementing fiscal measures targeted at the mobile sector to support network resilience, and ensure affordability and access to vital connectivity.
There are a number of practical ways this can be achieved – through a reduction on consumer taxes, using fiscal measures to stimulate network resilience and investment, and encouraging the use of mobile money through tax reductions and transaction limits.
Some examples are:
Waiving taxes on consumers to support affordability
A lack of affordability remains a key barrier to connectivity. Temporarily waiving taxes on mobile voice and data services can support mobile access and usage, reduce the costs of remote working and support social distancing efforts.
For example, for a period of 4 months from 13 April 2020, the Colombian government has eliminated VAT (19%) on prepaid and post-paid mobile service plans (voice and data) up to $17 (71.214 pesos). By improving affordability of mobile services, this measure aims to facilitate access to connectivity for all Colombians and, in particular, among lower-income groups.
Promoting network resilience and investment in connectivity
Mobile operators are also responding to the crisis by offering solutions to those suddenly facing financial hardship, such as flexible payment options, the lifting of data caps, and the lowering or waiving of mobile money transaction fees.
AT&T has offered to waive overcharges for data and voice in the US (from 13 March until 30 June 2020), Airtel Uganda is providing free access to health and education websites and, for a limited period of time, Telefonica is offering additional data capacity in a number of countries including Spain, Ecuador and Brazil.
At the same time, and as more people rely on digital services to work from home, manage their businesses and communicate remotely with friends and family, operators are also faced with the need to accelerate investment in networks to address the unprecedented surge in traffic.
Governments can support the industry to ensure they can meet this demand, while at the same time guaranteeing affordability and access to a full range of services. For example:
- The Malaysian and Maltese governments are supporting access to connectivity by providing tax incentives for ICT assets (Malaysia), and allowing 45% cost refund in ICT facilities (up to EUR 500 per worker) for employers with remote working employees (Malta).
- The government of Colombia has temporarily suspended payments from operators into the universal service fund (TIC), from 23 March until 30 May 2020.
- In Kenya, the government appointed a COVID-19 ICT Advisory Committee, for an initial period of 6 months, to coordinate ICT specific responses to the effects of the pandemic. Its responsibilities include advising on initiatives relating to universal access to communication services and affordability of connectivity.
Easing taxes and transaction limits on mobile money
Lowering taxes on mobile money transactions and increasing transaction limits improves the affordability of mobile money services – supporting payments, economic activity, and helping those facing liquidity issues.
Many governments, and especially those in developing countries, are promoting digital payment transactions by increasing mobile money transaction and wallet limits and/or providing easier registration for mobile money accounts. For example:
- In Ghana, the Central Bank has increased mobile money transaction and wallet limits. To ease registration, new mobile money subscribers can use their mobile phone registration details. These measures apply for a period of three months, effective 20 March 2020.
- In Liberia, the Central Bank increased the daily and monthly transaction limit for mobile money transactions for a period of three months, as announced on 24 March 2020.
- In Egypt, the Central Bank of Egypt (CBE) increased the limit for electronic payments via mobile money to EGP 30,000/day and EGP 100,000/month for individuals, and to EGP 40,000/day and EGP 200,000/per month for legal entities. The CBE also introduced exceptional measures allowing electronic Know-Your-Customer (eKYC) procedure, under specific conditions.
In the coming months governments, and in particular, those of low and middle-income countries, will have to mobilise additional financial resources to mitigate the impacts of the COVID-19 crisis. Enabling or reinforcing digital payments from persons and businesses to public entities will play an important role in strengthening the capacity to collect tax and other revenue. As an example, the African Tax Administration Forum (ATAF) recommends to tax authorities to digitise tax payments as part of measures to overcome the COVID-19 crisis. In Pakistan, enabling the digital collection of invoice-based payments such as education fees, is also part of the measures taken to limit the spread of COVID-19.
In the fight against COVID-19, mobile services provide unique solutions to governments, businesses and citizens to remain connected and guarantee economic activity while complying with new health measures. Lowering taxes on mobile services and mobile money supports businesses and citizens to remain connected, maintain payments and support economic activity. These measures could be prioritised even beyond the short term response to the current health crisis, recognising that the digital inclusion agenda to connect the unconnected is a building block for a resilient society and economy.