Governments warned over heavy mobile taxes

GSMA director general Anne Bouverot argues that heavy taxation on the mobile industry could threaten the economy. (Duncan Alfreds, Fin24)
GSMA director general Anne Bouverot argues that heavy taxation on the mobile industry could threaten the economy. (Duncan Alfreds, Fin24)

Cape Town - Governments should not tax mobile operators out of existence, says an international organisation.

"Taxation is a very sensitive area. Of course all companies should pay tax on their profit, but then there's a temptation from some governments to look at mobile as a specific sector to which they should apply more tax," Anne Bouverot, director general of the GSMA told Fin24.

In Hungary recently, the government proposed an internet tax on internet service providers (ISPs), but it resulted in thousands of people taking to streets to protest, eventually forcing the government to abandon the idea.

"There the government wanted to apply a tax on companies providing internet services, and the users went into the streets saying: 'Guess what, who will pay the taxes in the end, it will be the users of the internet and it will be a way to restrict freedom of people to go and use internet services,'" Bouverot said about the protests.

In the early stages of the mobile industry, many companies in developing countries were given subsidies or other incentives to roll out networks.

Mobile contribution

However, as these networks connected populations, governments eager to accelerate revenue have turned their attention to mobile operators as an easy revenue stream.

"I think we need to remember that if you tax either smartphones or internet or mobile money, you're taxing the users," Bouverot warned.

The GSMA's Mobile Economy Sub-Saharan Africa 2014 report found that the mobile ecosystem makes a healthy contribution to the GDP of countries in the region.

The mobile industry is a significant contributor to GDP. (Duncan Alfreds, Fin24)

The report shows that mobile operators alone contribute $27bn or 1.9% of the region's GDP, and a further $8bn in related industries.

"The activity generated by the both the mobile operators and the ecosystem also has a knock-on effect on the rest of the economy including further economic activity valued at $7bn (0.5% of GDP)," says the report.

In SA, the government has repeatedly signalled its intention to close the digital divide and has set 2020 for universal broadband access.

The appetite for data in Sub-Saharan Africa is huge. According to data from Ericsson's Mobile Data Traffic Growth report for 2013 to 2019, the region's data appetite is huge and expected to grow at 65% to 2019 and beyond.

Put into perspective, mobile data in the region was at 37 000 terabytes (TB) per month in 2013, and that will jump to 76 000TB by the end of 2014, on its way to a mammoth 764 000TB by the end of 2019.

Policy failure

"And if your objective is to have digital inclusion, and financial inclusion, you should make it easy for people to access the services and you should take into account that through this you will grow the economy overall," said Bouverot.

"You will get people who are not banked to be banked. You will get people who had no access to the internet to have access to the internet and therefore they will contribute more to the economy."

She warned that policy failure in the region could see an evaporation of revenue as the tax burden on consumers became too heavy.

"One of the key benefits of mobile money as well is it gets the informal economy to the formal economy. If you tax it heavily, it will go back to the informal economy."

Watch Bouverot explain the GSMA's position on mobile industry taxation in this online video:

- Follow Duncan on Twitter

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