Taxing Telecommunications in Developing Countries

November 15, 2017

Preview Citation

Format: Chicago

Thornton Matheson, and Patrick Petit. Taxing Telecommunications in Developing Countries, (USA: International Monetary Fund, 2017) accessed December 22, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Developing countries apply numerous sector-specific taxes to telecommunications, whose buoyant revenues and formal enterprises provide a convenient “tax handle”. This paper explores whether there is an economic rationale for sector-specific taxes on telecommunications and, if so, what form they should take to balance the competing goals of promoting connectivity and mobilizing revenues. A survey of the literature finds that limited telecoms competition likely creates rents that could efficiently be taxed. We propose a “pecking order” of sector-specific taxes that could be levied in addition to standard income and value-added taxes, based on capturing rents and minimizing distortions. Taxes that target possible economic rents or profits are preferable, but their administrative challenges may necessitate reliance on service excises at the cost of higher consumer prices and lower connectivity. Taxes on capital inputs and consumer access, which distort production and restrict network access, should be avoided; so should tax incentives, which are not needed to attract foreign capital to tap a local market.

Subject: Corporate income tax, Excises, Rent tax, Tax incentives, Taxes, Value-added tax

Keywords: Ad valorem excise, Africa, Cell, Cell phone, Cellular, Corporate income tax, Excise, Excises, Fixed cost, Global, Incoming call, International call, Phone, Rate of return, Regulation, Rent, Rent tax, Sub-Saharan Africa, Tax, Tax burden, Tax incentives, Telecommunications, Telephone call, Value-added tax, Value-added tax, WP

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/247
Stock No:

WPIEA2017247
ISBN:

9781484324981
ISSN:

1018-5941

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