What can be said about mobile-only taxes, again?

Posted on February 5, 2015  /  0 Comments

One thinks that the case has been made over and over again that the connectivity made possible by ICTs is a good thing. Governments appear to act on this basis when they formulate telecom and broadband policies and sometimes even direct subsidies to encourage greater connectivity. Yet, whenever there is need for money all that falls by the wayside and Willie Sutton takes over. Willie Sutton was a famous bank robber who was asked why he robbed banks. “I rob banks because that’s where the money is,” he said. This quotation has been now converted into Sutton’s Law that states that when diagnosing, one should first consider the obvious. Mobiles are popular; they have money; governments take money from where the money is.

A 2014 comprehensive systematic review completed by LIRNEasia that covered over 7,000 research publications has definitively established the existence of positive economic benefits from the mobile networks. Therefore, we cannot agree with mobile-specific taxes and levies being imposed only on the mobile industry.

The Government will argue that revenues are needed to cover the additional costs of keeping its election promises. It is short-sighted and counter-productive to levy punitive taxes on the mobile industry which in 2013 contributed Rs. 24.5 billion to the Government through the telecommunications levy alone, in addition to spectrum fees and other payments to the Telecom Regulatory Commission. The telecom levy yielded more revenue to the Government than PAYE tax in 2013.

Internet and voice services over mobile networks are a merit good that should be encouraged. But if money is needed, tax them like other goods and services, nothing more, nothing less. But most importantly, do not harm the conditions for the ICT investment that is essential if Sri Lanka is to become a knowledge economy.

My column in the Financial Times.

In 2007, we went through this process with a different government. The Finance Ministry wanted to do a Sutton on the mobile industry. We protested based on the data that we had at hand. Several people now in positions of power in the government helped roll back that ill-considered proposal.

We hope that in these more enlightened times, the process will be simpler and the correction swifter.

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