GSMA Report Highlights Impact of Taxation on Mobile Connectivity in Latin America

Reducing Excessive Mobile Sector-Specific Taxation Would Promote Connectivity, Economic Growth, Investment and Fiscal Stability in the Region

Bogot , Colombia: The GSMA today announced findings from its latest report, Taxing Mobile Connectivity in Latin America: A review of mobile sector taxation and its impact on digital inclusion'. The report provides an overview of the tax and fee regime applied to mobile services and its impact on the affordability of mobile and investment in Latin America. While recognising the need of governments to balance the competing objectives of revenue maximisation and growth, the study explores how mobile sector taxation can raise the affordability barrier in the region, undermining digital inclusion efforts. It also discusses how uncertain and complex taxation regimes affect operators' ability to invest in infrastructure rollout.

Mobile connectivity is a significant enabler of digital inclusion and economic and social development, however, in many countries the mobile sector is over-taxed, which may hinder the continued development of the sector, said Sebasti n Cabello, Head of Latin America, GSMA. In Latin America, the total cost of mobile ownership is above the five per cent of income threshold recommended by the UN Broadband Commission. Some governments in the region apply additional sector-specific taxes on consumers and mobile operators, leading to negative affordability and investment impacts. In the current economic climate, it is paramount for governments to foster, not hinder, growth.

Key Report Findings

The report showed that the mobile industry in Latin America and the Caribbean contributed more than $260 billion to the regional economy in 2016 or five per cent of the region's GDP, supporting 1.7 million jobs. Findings from the research demonstrate the distortionary impact of sector-specific taxation, highlighting the potential economic benefits of rebalancing sector-specific taxes and regulatory fees:

In Latin America, only half of the population subscribes to the mobile internet, in comparison to more than 65 per cent of the population in Europe and the US;

In 2016, the mobile sector in Latin America paid, on average, 25 per cent of its revenues in the form of taxes and regulatory fees;

Consumers face sector-specific taxation in addition to general VAT in 11 out of the 20 countries studied;

Markets featuring higher levels of sector-specific taxes as a proportion of market revenue tend to have lower affordability levels;

For all countries in the region where data is available, the total cost of mobile ownership for purchasing a handset and 1GB of data per month is above the five per cent of income threshold recommended by the UN Broadband Commission; and

Mobile network operators have invested considerably in the region by launching more than 108 4G networks between 2011-2016, despite a challenging reduction to average revenue of 15 per cent per connection during the same period.

Recommendations

Rebalancing sector-specific taxes and regulatory fees can promote connectivity, economic growth, investment and fiscal stability. A number of principles for reforming sector-specific taxation and fees should be considered by governments in Latin America in order to align mobile taxation with that applied to other sectors and with the best practices recommended by international organisations such as the World Bank and the IMF:

Reduce sector-specific taxes and fees to help increase demand for mobile services and incentivise investment, which would lead to an overall growth in government tax revenues over the medium term;

Avoid excessive regulatory fees and taxes on revenues, and reduce Universal Service Fund (USF) contributions where the existing funds are underutilised;

Reduce complexity and uncertainty of taxes and fees on the mobile sector;

Reduce or remove import duties, for example, on network equipment;

Remove consumer taxes that target access to mobile services, which would help ease the burden on affordability for the lowest earners in the region;

Support effective pricing of spectrum to facilitate better quality and more affordable services;

Avoid excessive spectrum auction prices being used as revenue raising mechanism for the government over and above mobile operators' fair tax contributions;

Remove taxes on international incoming calls; and

Implement supportive taxation for emerging services such as the Internet of Things.

The report can be found at: https://www.gsmaintelligence.com/research/?file=61a38952cab354d09537f6675ed9772d&download (English)

https://www.gsmaintelligence.com/research/?file=78b12aeccb5227f2ca06369b9b4332f3&download (Spanish)

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About the GSMA

The GSMA represents the interests of mobile operators worldwide, uniting nearly 800 operators with more than 300 companies in the broader mobile ecosystem, including handset and device makers, software companies, equipment providers and internet companies, as well as organisations in adjacent industry sectors. The GSMA also produces industry-leading events such as Mobile World Congress, Mobile World Congress Shanghai, Mobile World Congress Americas and the Mobile 360 Series of conferences.

For more information, please visit the GSMA corporate website at www.gsma.com. Follow the GSMA on Twitter: @GSMA.

Media Contacts:

Mauro Accurso

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maccurso@gsma.com

Clare Fenny

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CFenny@webershandwick.com

GSMA Press Office

pressoffice@gsma.com

LINK:	https://www.gsma.com/newsroom/press-release/gsma-report-highlights-imp...
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