Lower mobile taxes in Bangladesh could boost overall government revenues
10 May 2006
GSMA research shows how governments in developing countries can help the mobile industry to drive economic growth
10th May 2006 - Dhaka - Governments in some developing countries may be working against their own interests by taxing and regulating the mobile industry as if it were supplying luxury goods rather than essential communications tools, according to two studies published today by the GSM Association. The government in Bangladesh could increase its overall tax revenue by removing specific taxes that hinder the uptake of mobile phones and services, according to a study by Frontier Economics.1
Specifically, within three years of removing taxes on new handsets and connections, the study estimates that the number of mobile users in Bangladesh could rise by an additional 2.5 million, producing a net overall increase in tax revenues. Net tax revenues would be boosted further by the positive knock-on effects in the wider economy, as more Bangladeshis benefit from the productivity gains offered by telecommunications.
The Bangladesh economy would also benefit from the reform of the country's telecommunications regulation, which is currently orientated towards subsidizing usage of fixed-line telephony, according to a complementary report by Ovum2. The report highlights three specific regulatory and policy barriers that are curbing mobile and economic growth in Bangladesh:
- the interconnection regime (the system that controls payments between operators for connecting calls) subsidises the current fixed line services at the expense of the more productive and cost-effective mobile industry
- political and regulatory pressure to reduce mobile prices, based on the misconception that mobile services in Bangladesh are relatively expensive,
- the block on mobile operators handling international calls.
Despite these obstacles, the mobile industry is already a major generator of employment in Bangladesh, Ovum found. The report concluded that the industry has created almost 250,000 new high-paying, urban jobs in Bangladesh and contributes US$650 million per annum to the economy.
"Mobile phones are the only fast, practical and cost-effective way to connect millions of Bangladeshis. In a developing country that is eager for economic development it makes no sense to tax vital mobile handsets and subscriptions as if they were luxury goods," says Tom Phillips, Chief Government and Regulatory Affairs Officer of the GSMA. "As these studies show, removing mobile specific taxes would actually generate higher overall tax revenues, as well as driving economic growth, a win-win for government and consumers"
The link between mobile phone penetration and economic growth in developing markets is well established, with a recent study by the London Business School suggesting that an increase of 10 mobile phones per hundred people typically boosts GDP growth by 0.6% per annum in developing nations.
Notes for editors
1The Frontier Economics study, "Taxation and the Development of the Mobile Market in Bangladesh" was carried out in cooperation with the three major mobile operators in Bangladesh: GrameenPhone, Aktel and Banglalink, which account for 95 per cent of the mobile market in the country. It was designed to establish the extent to which there is scope to improve the current tax regime.
2 The Ovum report, "Economic and Social Benefits of Mobile Services in Bangladesh" examines the policy barriers which prevent the full benefits of mobile services from being realised and makes recommendations for change.
The two documents will be launched at the GSMA-hosted South Asia Regulators' Seminar in Dhaka, Bangladesh, attended by the Minister of Telecommunications and Minister of Finance and organised in conjunction with Bangladesh Telecommunication Regulatory Commission (BTRC). Other participants will include regulators and mobile operators from Bangladesh, Pakistan, India, Sri Lanka, Bhutan, Vietnam, Nepal and Iran. The seminar will address the theme of mobile regulation and market developments and will cover issues such as spectrum planning, rural telecommunications and low cost access to communications.
The event will be followed by a visit to the Natiapara Village Phone project, funded by GrameenPhone and one of 16 Community Information Centres (CIC ) located at different villages across the country. Projects like this have encouraged 100,000 rural women to become phone ladies by lending them the money to buy a cell phone and a solar charger, and offering some training in entrepreneurship and numeracy so that they can resell the phone service in their immediate village or surrounding villages. The Natiapara centre is also equipped with a Windows XP PC, a printer, scanner and web cam to provide internet connectivity to the villagers.
For further information contact:
Mark Smith
GSM Association
Tel. +44 (0)20 7759 2300
Fax. +44 (0)20 7759 2301
Email:press@gsm.org
or
David Pringle
GSM Association
Tel: +44 795 755 6069
Email:dpringle@gsm.org
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