ICC calls for cut in harmful taxes on telecoms sector

An updated ICC discussion paper, released today, highlights that a number of governments continue to tax certain goods and services in the telecommunications industry at higher rates than in other sectors, notwithstanding the urgent need to encourage growth in a challenging economic climate. Several studies have highlighted the positive effect of the telecommunications sector for improving productivity and economic growth across an entire economy. This updated ICC paper includes several new examples of countries, including Honduras, India, Malawi, Mexico, Montenegro and Slovakia, where discriminatory taxes are imposed on telecommunications goods and services.

The discriminatory taxes on telecommunications, the discussion paper says, are harming the long-term development of the information and communications technology (ICT) sector. By raising consumer prices, this stifles the adoption and use of broadband, mobile and other advanced sector services.

Further, because the impact of these taxes is often greater on lower income consumers, they hinder the chances of countries achieving their policy goals for universal adoption of fixed or mobile broadband.

Examples of these damaging taxes, cited in the ICC discussion paper, include the introduction by France and Spain in 2009 of a 0.9% levy on revenues from electronic communication service providers, which the European Commission later argued, in both cases, was incompatible with EU telecom rules. The discussion paper also points to the USA, where certain states tax communications services at more than twice the rate of other industries.

ICC says that cutting these discriminatory taxes on telecoms goods and services might temporarily reduce tax receipts in the short-term, but this loss will be countered in the long-term by the benefits to a country of increased competitiveness and increased broadband penetration.

This position is supported by a World Bank study of data from 120 countries, which revealed that each 10% increase in broadband penetration increases economic growth by 1.3%.

“We urge countries to update their view that telecommunications goods and services should be taxed as luxuries, rather than services for everyone in society,” said Eric H. Loeb, Chair of the ICC Commission on the Digital Economy’s task force on Internet and Telecommunications, and Vice President, International External Affairs AT&T.

“The ICT sector brings the building blocks of opportunity to the global information based economy. Countries should reconsider taxes that impede the drive for 100% adoption of advanced communication services,” Mr Loeb added.

All the taxes highlighted in today’s discussion paper represent opportunities for ICC to work with national governments to avoid, minimize or repeal the identified tax.

Download the ICC discussion paper on the adverse effects of discriminatory taxes on telecommunication.

Visit the Commission on the Digital Economy page.