Digital inclusion and mobile sector taxation 2015 Copyright © 2015 GSM Association Digital inclusion and mobile sector taxation About the GSMA This report has been prepared on the basis of the The GSMA represents the interests of mobile operators limitations set out in the engagement letter and the matters worldwide, uniting nearly 800 operators with more noted in the Important Notice From Deloitte on page 1. than 250 companies in the broader mobile ecosystem, Deloitte refers to one or more of Deloitte Touche Tohmatsu including handset and device makers, software Limited (“DTTL”), a UK private company limited by companies, equipment providers and Internet companies, guarantee, and its network of member firms, each of which as well as organisations in adjacent industry sectors. The is a legally separate and independent entity. 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Follow the GSMA on Twitter: @GSMA Contact: Davide Strusani TMT Economic Consulting, Deloitte [email protected] Digital inclusion and mobile sector taxation Contents Important Notice from Deloitte 2 Executive summary 3 1 Digital inclusion, mobile taxation and economic growth 19 1.1 This review 20 1.2 Benefits and barriers to digital inclusion 20 1.3 Affordability, investment and mobile taxation 25 1.4 The benefits of a balanced taxation structure 27 2 Taxation on mobile consumers 29 2.1 Taxation on mobile consumers 31 2.2 Mobile-specific taxation on consumers 33 2.3 Mobile-specific taxation on usage 36 2.4 Mobile-specific taxation on devices 39 2.5 Mobile-specific taxation on activation 42 3 Taxation and other fees on mobile consumers and operators 49 in 26 selected countries 3.1 Total mobile tax and fee payments 50 3.2 Total tax and fee payments from mobile-specific taxation 54 3.3 Taxes on profits and revenues 56 3.4 Regulatory and spectrum fees 58 3.5 Import duties on network equipment 60 4 Transitioning to a taxation structure where mobile is treated 61 equally to other services 4.1 Principles of taxation best practice 62 4.2 Options to align mobile taxation to standard goods taxation 64 Appendix A: Methodology 65 A.1 Countries included in this review 66 A.2 Mobile consumer tax 67 A.3 Total mobile tax and fee payments 70 Appendix B: Country Tables 71 Digital inclusion and mobile sector taxation Important Notice from Deloitte This report (the “Report”) has been prepared by Accordingly, no representation or warranty, express Deloitte LLP (“Deloitte”) for the GSMA on the basis or implied, is given and no responsibility or liability of the scope and limitations set out below. is or will be accepted by or on behalf of Deloitte or by any of its partners, employees or agents or The Report has been prepared solely for the any other person as to the accuracy, completeness purposes of providing a review of mobile sector or correctness of the information contained in this taxation in selected countries. 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Any results from the analysis contained in the Report are reliant on the information available at the time of writing the Report and should not be relied upon in subsequent periods. 2 Digital inclusion and mobile sector taxation Executive Summary Over the last 10 years, the GSMA and Deloitte have partnered to examine the economic and social impacts of the mobile industry and the impacts of mobile-specific taxation on industry growth, affordability and digital inclusion. These studies have demonstrated that mobile services are taxed at a higher rate than other services in a significant number of countries. This report provides an updated review of taxes • Examines mobile consumer and operator taxes that apply to consumers’ use of mobiles and mobile in 26 countries, selected by the GSMA to reflect operators, and in particular of those sector-specific economies at various stages of development, with taxes levied only on mobile. The report: different taxation structures and maturities of the mobile sector. • Covers taxes levied on mobile consumers from 110 markets in Europe, Africa, Middle East, Latin • Is based on a tested methodology which was America and Asia Pacific. These markets have employed in similar studies in 2007 and 2011. Data been selected on the basis of previous similar was sourced from the GSMA, public databases as studies and on data availability. well as from mobile operators. 3 Digital inclusion and mobile sector taxation Improving affordability could unlock digital inclusion and sustain the growth of mobile broadband, especially in emerging economies where sector-specific taxation is creating barriers to access. Mobile services are bringing wide-ranging benefits to countries worldwide, with 3.4 billion unique mobile subscribers.1 The growth of the sector has enabled access to Information and Communications Technology (ICT) for many, promoting the dissemination of information and ideas, increasing productivity and ultimately delivering economic and social growth. However, barriers to extending access to mobile broadband services remain, especially in developing countries, where affordability is a key problem. Taxation that affects mobile services disproportionately compared to other services can increase these barriers and impact both affordability and the incentives to invest in network roll-out. Figure 1 The benefits of removing mobile-specific taxes on consumers and operators A balanced tax structure This brings economic lowers barriers to and infrastructure affordability and increases development and network investment, increases productivity promoting mobile and employment across penetration. the economy. Increased mobile Increased sector and penetration delivers economic growth positive effects throughout the economy on education, could result in increased healthcare and overall tax revenue for the development. government. 1. GSMA Intelligence Database. 4 Digital inclusion and mobile sector taxation Across 26 selected countries, the total tax and fee payments from the mobile sector amounted to US$ 39 billion in 2013, while market revenues were US$ 117.5 billion This review estimates the total tax and fee payments from the mobile sector, including taxes and fees paid by operators (e.g. corporate tax, licence fees, revenue contributions, spectrum fees) and taxes on consumers (e.g. VAT, mobile-specific airtime excises, handset-specific taxes).2 Figure 2 Measuring the total tax contribution of the mobile industry TAXES AND FEES ON Total taxes and fees paid MOBILE OPERATORS by mobile operators, • Corporate tax including taxes paid by Total recurring • Revenue based contributions mobile consumers • Annual regulatory fees mobile tax and • Annual spectrum fees fee payments as a proportion TAXES ON MOBILE CONSUMERS of mobile • VAT Mobile operator revenues • Customs duty on handsets revenues • Mobile-specific taxes In the mobile industry, total tax payments and fees • The five countries that were found to have the are estimated to represent more than a third of highest consumer taxes as a percentage of TCMO market revenues for 11 of the 26 countries surveyed. are also among the countries with the highest tax payments as a proportion of mobile revenues. • Total mobile tax payments from taxation on both (Please refer to results and definitions on page 11). consumers and operators are estimated to range from 10.6% as a proportion of market revenues in Nigeria to 58.3% in Turkey. 2. The calculation does not reflect tax payments or revenues of players in the wider mobile ecosystem, such