Global Mobile Tax Review                                          2006–2007     Tax regimes that recognise mobile phones  ...
IntroductionThe impact that mobile communications is having on economic and social development,particularly in the develop...
Global Mobile Tax Review 2006–2007                                                                                        ...
Global Mobile Tax Review 2006–2007Executive summaryTax as a total share of cost of mobile ownership                       ...
Global Mobile Tax Review 2006–2007                                                                                        ...
Global Mobile Tax Review 2006–2007Executive summaryTelecommunication specific taxes                                       ...
Global Mobile Tax Review 2006–2007                                                                                        ...
Global Mobile Tax Review 2006–2007Executive summaryPercentage increase in subscribers by 2010, following a 10%reduction in...
Global Mobile Tax Review 2006–2007                                                                                        ...
Global Mobile Tax Review 2006–2007Executive summaryWorld Bank andUnited Nations perspectiveConsumers, particularly in deve...
Global Mobile Tax Review 2006–2007                                                                                        ...
Global Mobile Tax Review 2006–2007Executive summaryMethodologyDeloitte collected tax data through its’ international offic...
Global Mobile Tax Review 2006–2007                                                                                        ...
Global Mobile Tax Review 2006–2007Executive summary “Neil    Gough, Director of     International Policy, Vodafone “As a m...
Global Mobile Tax Review 2006–2007                                                                                        ...
Global Mobile Tax Review 2006–2007Executive summaryAcknowledgementsAbout Deloitte                                         ...
Global Mobile Tax Review 2006–2007                                                                                    Exec...
Global Mobile Tax Review 2006–2007Executive summaryAcknowledgementsSince 1976, Tarifica has been providing clear, up-to-da...
To download a full copy of the report visit
For more information contact:GSMA London Office              GSMA Dublin Office1st Floor Mid City Place        Block 271 H...
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200702 gsma global mobile tax review 06 07 - exec sum

  1. 1. Global Mobile Tax Review 2006–2007 Tax regimes that recognise mobile phones as a need not a luxury benefit all stakeholders Executive Summary
  2. 2. IntroductionThe impact that mobile communications is having on economic and social development,particularly in the developing world, is akin to that of other major enabling infrastructure likeroads, ports and railways. All stimulate trade, create jobs, generate wealth and enhance socialwelfare. Mobile communications, in particular, is making a profound impact by:i. Delivering universal access, currently covering 80% of the Despite the positive impact of mobile communications, this study world’s population – double the coverage rate in 2000. By 2010 has shown that 16 governments have taxation systems which levy mobile communications will bring affordable voice, data and higher taxes on mobile communications than the economy as a internet services to more than 5 billion people, reaching 90% whole. The findings of this report suggest that such taxation of the world’s population;1 and structures increase mobile prices, preventing less well off consumers from connecting to mobile networks and reducingii. Delivering universal services, with 2.7 billion people connected the usage of those that do. This report suggests that by removing to mobile networks versus 1 billion to fixed. In Africa the mobile specific taxes more consumers will connect, boosting number of mobile phone subscribers overtook the number economic growth, at very limited cost to total government tax of fixed lines in 2001. Today, mobile connections in Kenya receipts. In some cases long-term government tax receipts may outnumber fixed lines by 18 to 1 and in Tanzania by 32 to 1. even be positive. This report by the GSMA builds on the 2005 GSMA report, Tax and the Digital Divide, and extends the benchmark of taxes levied on the ownership and use of mobile phones to 101 countries, representing about 85% of the global population. This latest report analyses the impact of reducing/removing consumer taxes on mobile services through considering the impact of tax changes on: • A reduction in the price charged to the end customer; • The impact this change will have on mobile penetration and usage; and • The subsequent impact on tax revenues and GDP. From a sample of 57 developing countries, the report finds that a 10% increase in mobile penetration leads to a 1.2% increase in the annual growth rate in GDP. 2 Mobile phones are revolutionising the lives of millions of people and will continue to be the primary means for the great majority to access voice, data and internet services. This report makes the case for addressing taxation policy and levels to1 GSM Association, Universal Access, How Mobile Can Bring Communications support the extension of this essential franchise to the poorer to all, 2006. sections of society.2 Following Waverman et al. (2005) a growth model following the Endogenous Growth approach is applied. This is a cross-section estimation of the relation between average GDP per capita growth over a period of time (1980 to 2003 in our case, as in Waverman at al. (2005)) and the initial level of GDP per capita, literacy rate at the beginning of the period as proxy for initial human capital, average investment as a proportion of GDP and average mobile phone penetration. GDPpercapGrowth1980-2003 =α + β1MobPen1996-2003 + β2GDPpercap1980 + β3I + β4Literacy198001
  3. 3. Global Mobile Tax Review 2006–2007 Executive summaryKey findings Key recommendationsBased on analysis and modelling the following key findings Mobile specific taxes, levied in addition to VAT, discouragecan be drawn: the take up and usage of mobile communications. Taxation is, therefore, clearly a critical issue for consideration in spreading• Reducing mobile specific taxes and general consumer the use of mobile to poorer sections of the world. taxes such as VAT leads to substantial increases in mobile Telecommunications and finance policy makers, in collaboration penetration and usage; with the mobile industry, should examine in detail the effect of• Increased penetration boosts economic activity. In developing taxation in their respective jurisdictions. Key considerations countries a 10% increase in penetration leads to a 1.2% increase should include whether mobile should be taxed in a different in the annual growth rate in GDP; manner from the remainder of an economy, i.e. treating mobile communications as a basic need and not as a luxury.• Turkey levies the highest taxes on mobile consumers in our sample set, totalling 44% of each $ spent by consumers. This In the case of mobile specific taxes, analysis should focus on position is consistent with the last GSMA report on this issue; the impact of gradually lowering as well as restructuring tax regimes to increase the affordability of mobile services. In many• Taxation of mobile consumers in East Africa is almost twice the jurisdictions it appears possible to create net positive effects for 17.4% global average, potentially limiting mobile expansion in government, industry and consumers. the region and the associated benefits;• 20 jurisdictions levy higher taxes on mobile consumers than fixed;• A reduction in mobile specific taxation could approach revenue Case study: Impact of reducing mobile specific taxes in Kenya neutrality in 14 of these 16 countries, as reductions in government taxation revenue would be counterbalanced by greater VAT, corporation tax and economic growth; A mobile specific tax of 10% is applied to usage in Kenya.• Case study evidence from Kenya suggests that cutting mobile A forthcoming GSMA study has estimated that if this tax was specific taxes can have a revenue positive impact for the halved to 5% in 2007, within 10 years this change will increase: government in the medium term in countries where mobile • Usage by 7%; penetration is still low; • Penetration by 5%; and• Of the countries surveyed, 16 still have mobile specific taxes. Such taxes are regressive in developing countries, in that they • Operator revenues by 8%. are proportionally greater on the poorer members of society Though total taxation revenues (including corporation tax who use mobile phones as their source of universal access; and and regulatory fees) from the mobile operators would fall• On average, tax accounts for 24.8% of total handset costs and slightly over the period, the multiplier impact of the economic 45 countries (nearly half of those surveyed) impose specific growth that would be stimulated leads to a net increase in import duties on handsets. government tax revenues. As demand for mobile services increases this leads to greater employment and investment by the mobile operator. If excise duties were halved the GSMA estimates that the net impact on the level of government tax receipts from mobile operators, including the associated growth in the economy, would be between 2-4% higher in the period to 2011. 02
  4. 4. Global Mobile Tax Review 2006–2007Executive summaryTax as a total share of cost of mobile ownership Source: Deloitte 2006 Turkey Tanzania Uganda Brazil Ukraine Zambia Dominican Republic Ecuador Greece Argentina Kenya Denmark Sweden Mozambique Nepal Italy Zimbabwe Finland Poland Cameroon Senegal Chad Rwanda Portugal Ireland Dem Rep. Congo Morocco Colombia Slovenia Uzbekistan Hungary Austria Bulgaria Gambia The France Azerbaijan Georgia Chile Peru Burkina Faso Jordan Guinea Romania Albania Czech Republic Slovakia Gabon The Netherlands Cote dIvoire Russian Federation Lithuania Latvia Malta Estonia Madagascar Tunisia United Kingdom Ghana AVERAGE Thailand Trinidad and Tobago Mexico Spain Ethiopia Germany Bangladesh Pakistan Venezuela RB Mauritius Nicaragua Luxembourg Kazakhstan Guinea-Bissau Sri Lanka Cyprus Egypt Arab Rep. South Africa Samoa Mauritania Bolivia Cambodia Guatemala India Philippines Indonesia Iran Islamic Rep. Lao PDR Vietnam Botswana Paraguay Yemen Sierra Leone Papua New Guinea Lesotho Angola Nigeria Syrian Arab Republic Malaysia China Bhutan Myanmar Swaziland 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%03 Percentage
  5. 5. Global Mobile Tax Review 2006–2007 Executive summaryTax as a percentage of handset cost Source: Deloitte analysis based on Tarifica, Wireless Intelligence and Deloitte tax data Syrian Arab Republic Iran Islamic Rep. Cameroon Rwanda Chad Brazil Tanzania Mexico Mozambique Trinidad and Tobago Bhutan Argentina Ghana Senegal Gambia The Turkey Azerbaijan Dem Rep. Congo Samoa Guinea Burkina Faso Georgia China Venezuela RB Uganda Gabon Cote dIvoire Ethiopia Cambodia Chile Sweden Denmark Bolivia AVERAGE Russian Federation Peru Zambia South Africa Morocco Zimbabwe Finland Poland Lesotho Colombia Portugal Ireland Myanmar Lao PDR Bangladesh Italy Austria Uzbekistan Ukraine Slovenia Hungary Bulgaria Albania France The Netherlands Greece Slovakia Romania Czech Republic Vietnam Indonesia Madagascar Tunisia Malta Lithuania Latvia Handset taxes Estonia Botswana United Kingdom Kenya The jurisdictions with the highest tax, as a proportion of total Spain Germany handset cost, are Syria, Iran, Cameroon, Chad and Rwanda: Nigeria Angola Mauritius • Syria charges an average $24 in taxes, on top of 20% VAT Guinea-Bissau and 10% customs duty; Nicaragua Luxembourg Kazakhstan • Iran’s customs duties are 60%, by far the highest duties on Cyprus Sri Lanka mobile handsets within the sample of countries studied; and Nepal Swaziland • Cameroon has also some of the highest custom duty Mauritania Paraguay charges, 32%, which are levied in addition to 19% VAT. Yemen Guatemala Ecuador Philippines Sierra Leone Egypt Arab Rep. Papua New Guinea Malaysia Thailand India Jordan Dominican Republic Pakistan 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percentage 04
  6. 6. Global Mobile Tax Review 2006–2007Executive summaryTelecommunication specific taxes Telecommunications specific taxesCountry Connection Subscription HandsetAlbania Post pay $59/Prepay $7/Fixed $146: registration and subscription chargesBangladesh $11.76 Paid at subscription: mobile $3 Fixed charge on import of mobile and fixed and fixed handsetsDominican 2% Communications developmentRepublic tax – paid on usage and subscription on mobile onlyGreece $1.92-$5.75 Subscriber’s special duty. Varies based on the monthly invoice totalIran Fixed charges at subscription of: $4.44 for pre-pay/$135 for post-paid /$0.33 on fixed line. This includes subscription tax for pre-pay /post-paid and fixed line and a Rural Areas Development tax for post-paidItaly $6.82 Mobile specific stamp duty on bills issued. Applies only on post-paid servicesJordan 4% special VAT due on telecoms services: charged on mobile and fixedKenya 10% Telecommunications Tax on usage: fixed and mobileNepal 10% Telephone services charges – $20.15 Telephone ownership fee: paid on usage only. Not applicable fixed and mobile to subscription and applies to both mobile and fixedPakistan $8.30 Fixed activation charges: mobile onlySri Lanka 2.5% Mobile Subscription Levy paid on total value of monthly charges: mobile and fixedTanzania 7% Telecommunications Tax on usage: fixed and mobileTunisia 5% Telecom Royalties: mobile 5% Telecoms Royalties: calculated and fixed on cost of handset plus VATTurkey Fixed Taxes at subscription: $23.86 5% Special communication tax – on Wireless usage and new subscription overall usage and fees for mobile special communication tax (mobile phones. Fixed telephony has a 15% telephony only) rate of Special communication taxUganda 12% Telecommunications Tax on usage: fixed and mobileVenezuela $1.56-$6.25 Subscription Tax on mobiles and fixed Source: Deloitte 200605
  7. 7. Global Mobile Tax Review 2006–2007 Executive summary Countries with differing taxation regimesMobile consumers pay higher taxes for fixed and mobile telephonythan fixed Tax regime: fixed vs mobile20 markets demonstrated lower taxes on fixed telephony,the key differences being: Country• A lower VAT rate or no VAT rate on fixed telephony services e.g. Senegal, Mauritania and Pakistan; Albania Higher usage taxes on mobile than fixed• Lower ‘other taxes’ levied on fixed telephony, such as lower, Argentina 4% excise tax charged on mobile but or no, excise tax due on services e.g. Thailand, Kenya, not fixed Tanzania, Uganda, Zambia and Argentina; and Colombia 20% VAT on mobile, 16% on fixed• Different levels of subscription/connection charges Dominican Republic No tax on fixed, 22% tax on mobile e.g. Albania. Egypt 15% sales tax on mobile, 5% on fixed Iran Higher subscription tax on mobile than fixed Kenya 10% excise tax on mobile but not on fixed Mauritania 14% VAT on mobile but not on fixed Nigeria 5% tax on mobile connections, no charge on fixed Pakistan Activation taxes on mobile but not on fixed Senegal 18% VAT on mobile none on fixed Syria 3% consumption and expenditure tax on mobile, 2% on fixed Tanzania 7% excise duty on mobile, none on fixed Thailand 10% excise duty on mobile but only 2% on fixed Turkey Only 15% tax on both subscription and consumption for fixed, but 25% tax for both for mobile. There is also a new special subscription communication tax at a fixed rate on mobile, but not on fixed telephony Uganda 12% excise duty on mobile, 5% on fixed Ukraine 7.5% pension fund charge on mobile, none on fixed Zambia 10% duty on mobile but none on fixed Source: Deloitte 2006 06
  8. 8. Global Mobile Tax Review 2006–2007Executive summaryPercentage increase in subscribers by 2010, following a 10%reduction in the level of telecoms specific taxes Kenya Uganda Tanzania Tunisia Jordan Iran Islamic Rep. Venezuela RBDominican Republic Italy Greece Turkey Albania Sri Lanka Pakistan Nepal Bangladesh 0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8% 0.9% 1.0% Change relative to base forecasts Source: Deloitte 200607
  9. 9. Global Mobile Tax Review 2006–2007 Executive summaryPercentage increase in subscribers by 2010, following a 10% Percentage increase in minutes of use by 2010, following a 10%reduction in the value of VAT on usage and handset sales reduction in the value of VAT on usage 1.0% 1.5% 0.8% 1.2%Change compared to base forecast Change compared to base forecast 0.6% 0.9% 0.4% 0.6% 0.2% 0.3% 0.0% 0.0% Maghreb and ME Sub-saharan Africa Asia Pacific CEE,CIS,Russia Latin America EU15 Maghreb and ME Sub-saharan Africa Asia Pacific CEE,CIS,Russia Latin America EU15 Source: Deloitte 2006 Source: Deloitte 2006 08
  10. 10. Global Mobile Tax Review 2006–2007Executive summaryWorld Bank andUnited Nations perspectiveConsumers, particularly in developing countries, are price sensitive in relation to the uptakeand usage of mobile phones. Taxation levels and regulatory fees, are a key variable impactingupon the total cost of mobile ownership and use. “Mohsen A. Khalil – Director, Global Information and Communication Technologies, World Bank “The World Bank is in a position where we can act as a With this in mind, one of the main objectives for us is to think facilitator in dialogue – an ‘honest broker.’ In our policy and about how to provide access to the poor and how we can provide investment work, we are primarily concerned with the social telecommunications services at affordable cost to the masses of and economic interest accrued to the country as a whole. the 6 billion world population instead of just the next billion. We Social responsibility, poverty reduction and economic growth believe that any taxation policy should be designed in a way that are the primary drivers for our policy considerations. does not add any further barriers to access or add to the cost of service provision for the poor, and should not deter or undermine “Generally speaking, for any policy to be sustainable – competitive market forces. Another important objective is that for example, taxation – it has to balance the interests taxation policies should ensure that the sector is always managed of all stakeholders. That would mean governments, in a way that will achieve a level playing field and will allow operators, investors/financiers, consumers and civil society equal distribution of services to all users of the population. at large. Taxation has a large impact on access to mobile communications. We have factual data that demonstrates We do not believe that taxation should be designed on the basis the direct link between connectivity and economic growth, of short-term considerations – it should be designed on the basis so achieving access at affordable prices to the broadest base of achieving the best long-term economic interests for the society of the population is essential to driving economic growth and in a way that accelerates the extension of services to the poor. and alleviating poverty. The indirect benefits to the economy of having affordable access to telecommunications services far outweigh any short-term “ benefit to the budget.” The rate of other taxes applied to mobile consumers can differ from other similar consumer goods. For example, excise duty in Turkey is levied at 6.7% for most electrical based consumer goods such as refrigerators and record players, whilst mobile phones are treated as a luxury goods and the consumer must pay 20% in tax, the same rate levied on furs, caviar and precious stones. Such discrepancies tended to relate to a world where mobile phones were indeed a luxury, rather than today’s situation where it is often the only means of communication available.09
  11. 11. Global Mobile Tax Review 2006–2007 Executive summary“Amir A. Dossal, Executive Director, United Nations Fund for International Partnerships (UNFIP)“Allowing easy access to timely and reliable information at The cost of owning and using a mobile phone could still be low cost, mobile communications offers a real opportunity reduced by governments and regulators, by, for instance: to bridge the digital divide. Information and Communication • Rationalisation of international and national policies and Technology (ICT) is a key tool for the achievement of the regulations applicable to communications; Millennium Development Goals – mobile communication can deliver affordable voice, data and internet services to billions • Adoption of policies that attract international operators to of people (it is estimated that more than 5 billion people will enter new national markets with minimal entry procedures have access to mobile communications by 2015 – double the and costs, and encourage manufacturers to rationalise number connected today). Bringing the benefits of mobile production with lower costs; and communications to those areas previously out of reach is • Adoption of policies that reduce entry barriers to small but crucial for development. Affordability is a key element to innovative entrepreneurs, and encourage risk-taking for new achieving broad access to mobile technologies among the less entrants in national markets. affluent. Considering that over one billion people still live on less than $1 a day, to ensure access to information for all, the Governments, of course, could reduce barriers to entry by total cost of owning and using a mobile phone clearly needs streamlining regulatory and taxing policies, which would have to be decreased significantly. a positive effect in increasing competition as well as reducing initial investment and operating costs – with powerful forces tending to reduce the price to the consumer. In principle, these measures should be of benefit to the broader economy and to entrepreneurial risk-taking and growth industries in particular, as this approach would tend to boost personal income and demand for services.” 10
  12. 12. Global Mobile Tax Review 2006–2007Executive summaryMethodologyDeloitte collected tax data through its’ international office network and constructed aneconomic model using Deloitte tax data, information from third party providers andassumptions verified by a major international telecoms provider. Deloitte also analysedpotential impact of changes in taxation using this model. The overall modelling approachadopted for this report is set out diagrammatically below.3Approach to modelling the impact of taxation changes Impact of tax change on Country company revenues Impact of tax characteristics change on mobile penetration Tax rates Corporation General Regression tax licence fees Telecom GST Handset Demand Impact of tax equations Impact on Mobile prices change on mobile government tax (penetration and usage (minutes usage) revenues and texts) Tax on mobile services Current prices Additional tax revenues Impact of tax change on demand for new handsets Impact on GDPThe model was estimated at the jurisdiction level for The level of increase in subscribers relative to the base case in each101 jurisdictions across the world and then aggregated for jurisdiction reflects both the nature and size of the mobile specificpresentational purposes. In order to compare the impact tax, the development of each jurisdictions mobile industry andof various tax changes: economy and the different levels of price elasticity of demand. In addition to these impacts on the level of penetration, removing• A base case scenario was created for all 101 jurisdictions, telecommunications specific taxes also increases minutes of use which projects for 5 years market development and tax and sales of handsets. revenue collection, assuming application of the current taxation structure. External market projections and an The reduction in mobile specific taxation approaches revenue econometric model are used to forecast penetration rates, neutrality in 14 of the 16 countries, as direct reductions in population, usage and handset sales; and Government taxation revenue is counterbalanced by greater VAT, corporation tax and growth across the economy.• All changes in penetration, handset sales, usage and Government tax revenue collection are compared to a base case scenario.The model estimates that reducing mobile specific taxes to 90% 3 The economic modelling conducted as part of this project relies on a numberof their current level would significantly increase penetration of assumptions as to the development of markets, population levels and theover and above the base case estimates by 2010. continuation of existing economic relationships. As with all such models the results should therefore be regarded as indicative rather than definitive.11
  13. 13. Global Mobile Tax Review 2006–2007 Executive summaryPercentage change in government revenues from base case in 2010following a 10% reduction in the level of telecoms specific taxes Kenya Uganda Tanzania Tunisia Jordan Iran Islamic Rep. Venezuela RB Dominican Republic Italy Greece Turkey Albania Sri Lanka Pakistan Nepal Bangladesh-2.0% -1.6% -1.2% -0.8% -0.4% 0.0% Change relative to base forecasts Source: Deloitte 2006The larger negative result for Greece is explained by limitedimpact on penetration in a saturated market. The result for Turkeyreflects its high reliance on mobile specific taxation relative toother countries. This results in an inability of the other economywide taxes to compensate for the loss of direct taxation income.In a simple static analysis this could be argued to make the caseagainst tax reform. However, a more dynamic analysis wouldneed to consider whether such a system provides the correctsignals and incentives for investment in the sector and acrossthe economy as a whole.It is also important to note that these results underestimate theadditional impact of increased mobile operation on the remainderof the economy through local economic multipliers.These findings confirm the views of many well knowninternational mobile operators. 12
  14. 14. Global Mobile Tax Review 2006–2007Executive summary “Neil Gough, Director of International Policy, Vodafone “As a mobile operator with broad international experience, imposed on mobile services than fixed line services. This creates Vodafone is concerned that some emerging markets may in fact distortions in competition between fixed and mobile services be implementing taxation policy in ways which harm their own which can have a very serious negative effect on the market. long-term interests. They often impose high, distortionary and For example, one particular tax in Turkey is levied at a rate regressive taxes. These reduce penetration and usage rates, reduce of 25% for mobile operators and 15% for fixed operators. the economic growth which the mobile industry could otherwise That is a differential that is not insignificant, and which reduces bring, and impose an unfair tax burden on poorer users. the ability of mobile operators to drive competition between fixed and mobile services – something that governments tell “There are a number of options that governments should us they want as much as economic growth. consider as a matter of urgency which address these negative effects, but still ensure the government can collect taxes. These There is no question that the level of taxation in Turkey is options don’t need to involve sudden or drastic reductions in extraordinarily high, and even more problematically, the way in tax revenues; they can instead involve a gradual restructuring which taxes are levied is regressive with high upfront fixed taxes of taxes that allows a similar amount of tax to be collected, but imposed on SIM cards and joining a network. It is no accident ensure it is collected in a fairer and more efficient way. that usage rates in Turkey are amongst the lowest in the world, and that mobile penetration rates are still some way short of “I should say that we understand why emerging market rates in comparable markets such as Eastern Europe. governments have been tempted to levy high taxes on the mobile market. When mobile was first introduced in emerging Some countries – for example, India – have moved in the right markets, mobile was considered to be a ‘luxury good’. Back direction by removing some of the licence and spectrum fees then mobile actually wasn’t such a bad thing to tax because it imposed on the mobile sector. They have deliberately done this genuinely was a luxury good available only to a few – it was to enhance the affordability of services and help increase the emerging market equivalent of yachts or caviar. penetration, which is one of their explicit policy objectives. “The problem is that when you roll the clock forward ten So, you need to examine not only the overall levels of tax but years, mobile is simply no longer a luxury good: it is the how they are actually structured. For a country looking to main communications service and a key enabler of economic increase mobile penetration and benefit from the social and development and social cohesion in emerging markets. economic impact of mobile communications, applying handset We have to recognise the legacy of why we ended up in this levies is clearly not a sensible policy. Indeed, this is usually position, recognise that those reasons are simply no longer ineffective because it only drives imports into the black market. valid. We need to move away from taxing mobile as a luxury There are plenty of options that governments should seriously good before emerging markets seriously hinder their prospects consider. I must stress that we are not suggesting that they need for economic growth. to immediately reduce taxes to zero. There are invariably opportunities for governments to restructure taxes so that they “In some of our markets, for example, Turkey, not only is there continue to collect a similar absolute amount of tax from the a high degree of taxation of communications services, but taxes communications sector, but do it in a much more efficient way.” are applied in a discriminatory manner: a higher rate is13
  15. 15. Global Mobile Tax Review 2006–2007 Executive summaryConclusionAt the World Summit on the Information Society in 2003, 175 countries signed up to acommitment to give more than half the world’s population access to information andcommunications technologies by 2015. Within four years market competition and privateinvestment has delivered this goal. The mobile industry provides access to more than80% of the world population and, by the end of 2007, 3 billion people will be connected.The World Bank maintains that whereas the first 3 billion connections will be market driventhe next 3 billion will be policy driven. One key policy tool that has an immediate impacton affordability is the level of taxation and this presents the potential to increase the mobilefranchise to poorer sections of society and to receiving the socio-economic benefits that result.“ChrisWilliams – Partner, Economic Consulting, Deloitte & Touche LLP“This study identifies a series of key findings that Governments Whilst global mobile penetration level now stands at 40% there need to take account of in developing their taxation and remain large differences in penetration between developed economic policy: countries and many developing countries, where despite fast“• Taxes are significantly higher in many developing countries growth rates penetration is below 25%. More needs to be done than those observed in many developed countries and 16 to increase these low rates, particularly in those countries where countries levy telecom specific taxes on top of standard sales mobile, as opposed to fixed line, is the main source universal and import taxes on mobile phone users; access. In the light of the results of this study, Governments may consider the impact of their tax policies on the growth“• Reducing mobile specific taxes would increase penetration, of mobile communications. To achieve this, we would urge usage and handset sales in the poorest regions of the world, Governments and mobile operators to work together to with its strongest impacts felt in Sub-sahran Africa; and determine the economic impact of the sector, the ideal tax mix“• Lower mobile specific taxes appear to have a limited impact and how these combine to meet the objectives of their country. on Government taxation revenues. Whilst the immediate It appears that countries are more likely to reap the full social impact of lowering taxes lead to a decline in direct and economic benefits available through such a joined up Government revenues, these are mainly counterbalanced by approach and coherent economic thinking.” indirect taxation (corporation tax and regulatory fees) and the role of mobile communications as a driver of growth. 14
  16. 16. Global Mobile Tax Review 2006–2007Executive summaryAcknowledgementsAbout Deloitte For further information, or if you would like to talk to one of ourDeloitte has the broadest and deepest range of skills of experts on Telecommunications or Tax matters please contact:any business advisory organisation. We are renowned Global – John Ruffolo T + 1 416 601 6684for our innovation, collaboration, our solutions-led approach, E jruffolo@deloitte.caand our outstanding quality of client service. EMEA – Dennis Knowles T +44 20 7007 3822The Deloitte Touche Tohmatsu (DTT) Technology, Media & E (TMT) Industry Group consists of morethan 5,000 member firm partners, directors and senior managers Asia Pacific – Nigel Mellor T +65 6530 5523supported by thousands of other professionals. E nimellor@deloitte.comTMT has dedicated practices in 45 countries, centres of Latin America – Carlos Ianucci T +54 11 4320 2736excellence in the Americas, EMEA and Asia Pacific and serves E ciannucci@deloitte.comover 90 percent of the TMT companies in the Fortune Global 500. Economic Consulting – Chris WilliamsClients include some of the world’s top software companies, T +44 20 7007 1071computer manufacturers, wireless operators, satellite broadcasters, E advertising agencies – as well as leaders in publishing,telecommunications and peripheral equipment manufacturing.The tax data collection and economic analysis for this report wasconducted by Deloitte & Touche LLP. The data and analysis issubject to assumptions and limitations which are highlighted invarious sections within the full report.This information contained herein has been written in general terms and Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, itstherefore cannot be relied on to cover specific situations; application of the member firms, and their respective subsidiaries and affiliates. Deloitte Toucheprinciples set out will depend upon the particular circumstances involved and Tohmatsu is an organisation of member firms around the world devoted towe recommend that you obtain professional advice before acting or refraining excellence in providing professional services and advice, focused on clientfrom acting on any of the contents of this publication. service through a global strategy executed in nearly 140 counties. With access to the deep intellectual capital of approximately 135,000 people worldwide,Deloitte Touche Tohmatsu would be pleased to advise readers on how to apply Deloitte delivers services in four professional areas – audit, tax, consulting andthe principles set out in this report to their specific circumstances. Deloitte Touche financial advisory services – and delivers more than 80 percent of the world’sTohmatsu accepts no duty of care or liability for any loss occasioned to any person largest companies, as well as large national enterprises, public institutions,acting or refraining from action as a result of any material in this report. locally important clients, and successful, fast-growing global growth companies.Deloitte & Touche LLP refers to the United Kingdom limited liability Services are not provided by the Deloitte Touche Tohmatsu Verein, and, forpartnership, a member firm of DTT. regulatory and other reasons, certain member firms do not provide services in all four professional areas. As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other’s acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names “Deloitte”, “Deloitte & Touche”, “Deloitte Touche Tohmatsu”, or other related names.15
  17. 17. Global Mobile Tax Review 2006–2007 Executive summaryThe GSM Association (GSMA) is the global trade associationrepresenting more than 700 GSM mobile operator Membersacross 218 countries and territories of the world. In addition,over 190 Associate Members (manufacturers and suppliers)support the Association’s initiatives as key partners.Encompassing technical, commercial and public policy initiatives,the GSMA focuses on ensuring wireless services work globally;thereby enhancing the value of mobile services to individualcustomers and national economies while creating new businessesopportunities for operators and their suppliers.For further information contact:Mark Smith / David PringleGSM AssociationTel: +44 78 50 22 97 24 / +44 79 57 55 60 16
  18. 18. Global Mobile Tax Review 2006–2007Executive summaryAcknowledgementsSince 1976, Tarifica has been providing clear, up-to-date and Wireless Intelligence is a comprehensive database on theaccurate tariff information to network operators, regulators global mobile market. It covers all mobile technologiesand financial institutions. and includes over a million individual data points across 600 operators, 1,100 networks in 220 countries. Because of aOur global, multilingual team of researchers constantly monitors need for an up-to-date and accurate view of the global mobileand reports on the ever-changing tariff environment whether for markets, the GSM Association formed a unique partnershipvoice, data, Internet or video services. Coverage is comprehensive with Ovum, the leading industry analyst firm.with Tarifica’s databases containing the Fixed and Mobile tariffsfor over 400 operators in 130 countries. Through the GSMA, the majority of the world’s operators have access to their own data and, with over 40,000 database queries byIn-depth comparisons are easily obtained from quarterly pricing members in 2006, this makes Wireless Intelligence one of the mostbenchmarks of European, Middle-Eastern and Asia-Pacific referenced sources of its kind in the The most important tariff developments worldwide areanalysed in a weekly newsletter which has become the must-read Wireless Intelligence provides operator data across operationalpublication for service provider pricing specialists. and financial metrics and allows analysis at an operator, country,Contact: John Lilley – Tel: +44 (0)207 692 5287, regional or global level. The metrics in the service cover connections, growth rates, technology market shares as well as a range of operational metrics such as churn, minutes of use and financial metrics including revenue, capex and EBITDA margin.17
  19. 19. To download a full copy of the report visit
  20. 20. For more information contact:GSMA London Office GSMA Dublin Office1st Floor Mid City Place Block 271 High Holborn Deansgrange Business ParkLondon WC1V 6EA DeansgrangeUnited Kingdom Co. Dublin IrelandTel: +44 (0)20 7759 2300 Tel: +353 (0)1 289 1800Email: