Our intention was to introduce the Digital Dividends report of the World Bank and disseminate related research conducted by LIRNEasia. We made the headlines in two newspapers but the focus was the controversy around excessive taxes more than on the research. But I was happy there was at least one quotation that referred to the Systematic Review research. “Airbnb has been in Sri Lanka and they have been in discussion with the Government about collecting taxes and giving it to the Government. Now that is a model that can work, but the centralised platform where everybody will have to go to some kind of .
So the Daily Mirror, the leading English language daily, carried my comments on the illogical tax proposals. “Around 2010, the Government considered the complexity of taxes affecting the telecommunication sector and exempted telecom from the Value Added Tax. Instead a twenty percent tax was imposed for telecommunication which was remitted to the Government” said Former Director General of the Telecommunication Regulatory Commission and Telecommunication Expert Prof. Rohan Samarajeeva. “The previous Government also considered the data issue as separate from voice and value added services.
Following the online posting of my articles on the government’s 2017 Budget proposals affecting the ICT sector a rich discussion occurred over Twitter, which included participation and fact gathering by one of Sri Lanka’s leading journalists, Namini Wijedasa who writes in the highest circulation English newspaper. Thanks mostly to a valiant social media spokesperson from the Ministry of Public Enterprise Development who tried, to the best of his ability, to defend the indefensible. Examples below. Lot more Tweets. @Nimilamalee @samarajiva @groundviews 2013-2014 saw an increase of 1.
“The digital economy will empower our nation – through providing affordable and secure Internet connectivity to every citizen in any part of Sri Lanka, removing barriers for cross-border international trade.” The above quotation from the Prime Minister’s Economic Policy Statement in Parliament on 27 October 2016 suggests the government sees ICTs playing a vital role in the country’s progress. Sri Lanka has been a leader in ICTs in the region. The Prime Minister gave enthusiastic leadership to the e Sri Lanka initiative, which when launched was a pioneering effort. It is known that he played a valuable role in connecting Sri Lanka to the Internet in the 1990s.
There is proof that the government of Sri Lanka pays attention to international benchmarks. When the ITU’s Measuring the Information Society Report showed that Sri Lanka had some of the lowest mobile voice charges in the world (p. 102), the government took prompt action by increasing taxes on voice, SMS and value added services by 80 percent and on data by 160 percent (even though Sri Lanka was not as low as for voice, but the prices were in the low range). The logical conclusion is that they want the people to decrease use of voice and data caused by these low prices. But they want to use public funds to develop ICT based services, as indicated by the 479 percent increase in the vote of the Ministry of Telecom and Digital Infrastructure.
The 80 percent and 160 percent increases in taxes on voice-SMS-VAS services and data, respectively, caused me to write an oped anchored on one instrument of public policy, use of fiscal means to discourage use of demerit goods. I wish to make clear that there is nothing wrong with subjecting telecom services to normal taxation such as VAT and NBT. Many years ago, that was the case. But over time various additional levies were layered on top, taking the overall tax burden to around 32%. Around 2009, the previous Government rationalised the mess, exempting telecom services from general taxation while imposing a single telecom levy.
The government-owned Sunday Observer has carried a story on the unraveling of the previous tax regime affecting telecom services that makes reference to the findings of our Systematic Reviews. “This will be the highest tax ever imposed on telecom users in the country. It is likely to reduce telecom use, especially of data. It is contrary to government policy seeking to encourage internet use,” Prof. Samarajiva said.
I was asked to comment to the state-owned Sunday Observer on the Sri Lanka government’s decision to extend value-added taxes to the telecom industry. Below is my response. I have always taken the position that telecom services should be treated no differently from other goods and services. Therefore, I do not object to making telecom services subject to VAT. The problem is with the approximately 25 percent mobile levy.
When these misguided taxes were proposed back in January in the interim budget, I protested. An example is here. They could not get the bills passed in the previous Parliament. It was the Ceylon Chamber of Commerce that labeled them as entity-based. But now they are through.
I am here at the Asia Pacific Regional Internet Governance Forum in Macau (I really wish they’ll agree on the English spelling; My visa says Macao; Government signboards here say Macau; my spell checker seems to prefer Macau). MAC representative Bangladesh Information Minister Hasanul haq Inu, M.P., said in his address, as he always does, that Internet is a basic human right. As Vint Cerf said, it is problematic to designate Internet as a basic human right.
It has been a long time coming, but finally the universal service contribution as a percentage of adjusted gross revenue (AGR) looks certain to be reduced from five percent to three percent. The last time we wrote about this was in 2009, when the Finance Ministry stopped it. But, of course, nothing is ever so simple. At the same time TDSAT has brought a whole lot of new revenue elements within the definition of AGR. That will get appealed and so on.
A Ratings Agency has put specific numbers behind the entity-based and mobiles-sector specific taxes in 2015 interim budget. Should the proposals go ahead, 2015 FFO-adjusted net leverage for Sri Lanka Telecom (SLT, BB-/Stable) and Dialog Axiata (Dialog, AAA(lka)/Stable) is likely to deteriorate to 1.8x and 2.5x, respectively (2014: 1.2x and 1.
Colombo, the focus of our exploratory work on mobile network big data, is a tiny town by global standards: 550,000 people. But our analyses show that the surrounding area is tightly integrated contributing over 54 percent of the daytime population of the city, but contributing little or nothing to the services the commuters must be provided. A former Mayor once told me that he had thought of using the dormant power of the legislation that established the Colombo Municipal Council to establish tolls at the gates of the city. Appears this is not a problem limited to Colombo. Current debates about the efficiency of urban governance gravitate around the ‘fit’ between the size of the administrative boundary controlled by a city mayor or governor, and the actual number of people who live in the ‘wider functional metropolitan’ area.
A 24/7 news channel interviewed me about the mobile-only taxes proposed by the new government. It is not online (yet) so I cannot give a link. The last question I was asked by the interviewer was about my recommendations to the government. Here is what I said: 1. The proposal that the mobile operators should pay the 25 percent tax on voice calls currently paid by mobile users should be withdrawn.
Last night (4th February 2015), the TV Channel Derana invited me to participate in a debate in Sinhala on the interim budget presented by the new Minister of Finance. Here I used the case of punitive taxes on mobiles as a way of discussing the possible implications for investment in general, and for the ICT sector in particular. There was an intriguing tangential discussion on mobiles being bad per se that I will write about separately. Link to video clip in Sinhala.
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.