200702 gsma global mobile tax review 06 07 - exec sum

Global Mobile Tax Review

Tax regimes that recognise mobile phonesas a need not a luxury benefit all stakeholders

2006–2007

Executive Summary

01

Despite the positive impact of mobile communications, this studyhas shown that 16 governments have taxation systems which levyhigher taxes on mobile communications than the economy as awhole. The findings of this report suggest that such taxationstructures increase mobile prices, preventing less well offconsumers from connecting to mobile networks and reducingthe usage of those that do. This report suggests that by removingmobile specific taxes more consumers will connect, boostingeconomic growth, at very limited cost to total government taxreceipts. In some cases long-term government tax receipts mayeven be positive.

This report by the GSMAbuilds on the 2005 GSMA report,Tax and the Digital Divide, and extends the benchmark of taxeslevied on the ownership and use of mobile phones to 101 countries,representing about 85% of the global population. This latest reportanalyses the impact of reducing/removing consumer taxes onmobile services through considering the impact of tax changes on:

• A reduction in the price charged to the end customer;

• The impact this change will have on mobile penetrationand usage; and

• The subsequent impact on tax revenues and GDP. From asample of 57 developing countries, the report finds that a 10%increase in mobile penetration leads to a 1.2% increase in theannual growth rate in GDP. 2

Mobile phones are revolutionising the lives of millions ofpeople and will continue to be the primary means for the greatmajority to access voice, data and internet services. This reportmakes the case for addressing taxation policy and levels tosupport the extension of this essential franchise to the poorersections of society.

Introduction

i. Delivering universal access, currently covering 80% of theworld’s population – double the coverage rate in 2000. By 2010mobile communications will bring affordable voice, data andinternet services to more than 5 billion people, reaching 90%of the world’s population;1 and

ii. Delivering universal services, with 2.7 billion people connectedto mobile networks versus 1 billion to fixed. In Africa thenumber of mobile phone subscribers overtook the numberof fixed lines in 2001. Today, mobile connections in Kenyaoutnumber fixed lines by 18 to 1 and in Tanzania by 32 to 1.

1 GSMAssociation, Universal Access, How Mobile Can Bring Communicationsto all, 2006.

2 Following Waverman et al. (2005) a growth model following the EndogenousGrowth approach is applied. This is a cross-section estimation of the relationbetween average GDP per capita growth over a period of time (1980 to 2003in our case, as in Waverman at al. (2005)) and the initial level of GDP percapita, literacy rate at the beginning of the period as proxy for initial humancapital, average investment as a proportion of GDP and average mobilephone penetration.GDPpercapGrowth1980-2003 =α + β1MobPen1996-2003 + β2GDPpercap1980 + β3I + β4Literacy1980

The impact that mobile communications is having on economic and social development,particularly in the developing world, is akin to that of other major enabling infrastructure likeroads, ports and railways. All stimulate trade, create jobs, generate wealth and enhance socialwelfare. Mobile communications, in particular, is making a profound impact by:

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Global Mobile Tax Review 2006–2007Executive summary

Key findingsBased on analysis and modelling the following key findingscan be drawn:

• Reducing mobile specific taxes and general consumertaxes such as VAT leads to substantial increases in mobilepenetration and usage;

• Increased penetration boosts economic activity. In developingcountries a 10% increase in penetration leads to a 1.2% increasein the annual growth rate in GDP;

• Turkey levies the highest taxes on mobile consumers in oursample set, totalling 44% of each $ spent by consumers. Thisposition is consistent with the last GSMA report on this issue;

• Taxation of mobile consumers in East Africa is almost twice the17.4% global average, potentially limiting mobile expansion inthe region and the associated benefits;

• 20 jurisdictions levy higher taxes on mobile consumersthan fixed;

• A reduction in mobile specific taxation could approach revenueneutrality in 14 of these 16 countries, as reductionsin government taxation revenue would be counterbalancedby greater VAT, corporation tax and economic growth;

• Case study evidence from Kenya suggests that cutting mobilespecific taxes can have a revenue positive impact for thegovernment in the medium term in countries where mobilepenetration is still low;

• Of the countries surveyed, 16 still have mobile specific taxes.Such taxes are regressive in developing countries, in that theyare proportionally greater on the poorer members of societywho use mobile phones as their source of universal access; and

• On average, tax accounts for 24.8% of total handset costs and45 countries (nearly half of those surveyed) impose specificimport duties on handsets.

Key recommendationsMobile specific taxes, levied in addition to VAT, discouragethe take up and usage of mobile communications. Taxation is,therefore, clearly a critical issue for consideration in spreadingthe use of mobile to poorer sections of the world.Telecommunications and finance policy makers, in collaborationwith the mobile industry, should examine in detail the effect oftaxation in their respective jurisdictions. Key considerationsshould include whether mobile should be taxed in a differentmanner from the remainder of an economy, i.e. treating mobilecommunications as a basic need and not as a luxury.

In the case of mobile specific taxes, analysis should focus onthe impact of gradually lowering as well as restructuring taxregimes to increase the affordability of mobile services. In manyjurisdictions it appears possible to create net positive effects forgovernment, industry and consumers.

Case study: Impact of reducing mobilespecific taxes in KenyaAmobile specific tax of 10% is applied to usage in Kenya.A forthcoming GSMA study has estimated that if this tax washalved to 5% in 2007, within 10 years this change will increase:

• Usage by 7%;

• Penetration by 5%; and

• Operator revenues by 8%.

Though total taxation revenues (including corporation taxand regulatory fees) from the mobile operators would fallslightly over the period, the multiplier impact of the economicgrowth that would be stimulated leads to a net increase ingovernment tax revenues. As demand for mobile servicesincreases this leads to greater employment and investmentby the mobile operator.

If excise duties were halved the GSMA estimates that the netimpact on the level of government tax receipts from mobileoperators, including the associated growth in the economy,would be between 2-4% higher in the period to 2011.

03


Tax as a total share of cost of mobile ownership Source: Deloitte 2006Turkey

TanzaniaUganda

BrazilUkraineZambia

Dominican RepublicEcuador

GreeceArgentina

KenyaDenmark

SwedenMozambique

NepalItaly

ZimbabweFinlandPoland

CameroonSenegal

ChadRwandaPortugal

IrelandDem Rep. Congo

MoroccoColombia

SloveniaUzbekistan

HungaryAustria

BulgariaGambia The

FranceAzerbaijan

GeorgiaChilePeru

Burkina FasoJordan

GuineaRomaniaAlbania

Czech RepublicSlovakia

GabonThe Netherlands

Cote d'IvoireRussian Federation

LithuaniaLatviaMalta

EstoniaMadagascar

TunisiaUnited Kingdom

GhanaAVERAGE

ThailandTrinidad and Tobago

MexicoSpain

EthiopiaGermany

BangladeshPakistan

Venezuela RBMauritiusNicaragua

LuxembourgKazakhstan

Guinea-BissauSri Lanka

CyprusEgypt Arab Rep.

South AfricaSamoa

MauritaniaBolivia

CambodiaGuatemala

IndiaPhilippines

IndonesiaIran Islamic Rep.

Lao PDRVietnam

BotswanaParaguay

YemenSierra Leone

Papua New GuineaLesothoAngolaNigeria

Syrian Arab RepublicMalaysia

ChinaBhutan

MyanmarSwaziland

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Percentage

04


Syrian Arab RepublicIran Islamic Rep.

CameroonRwanda

ChadBrazil

TanzaniaMexico

MozambiqueTrinidad and Tobago

BhutanArgentina

GhanaSenegal

Gambia TheTurkey

AzerbaijanDem Rep. Congo

SamoaGuinea

Burkina FasoGeorgia

ChinaVenezuela RB

UgandaGabon

Cote d'IvoireEthiopia

CambodiaChile

SwedenDenmark

BoliviaAVERAGE

Russian FederationPeru

ZambiaSouth Africa

MoroccoZimbabwe

FinlandPoland

LesothoColombiaPortugal

IrelandMyanmarLao PDR

BangladeshItaly

AustriaUzbekistan

UkraineSloveniaHungaryBulgariaAlbania

FranceThe Netherlands

GreeceSlovakiaRomania

Czech RepublicVietnam

IndonesiaMadagascar

TunisiaMalta

LithuaniaLatvia

EstoniaBotswana

United KingdomKenyaSpain

GermanyNigeriaAngola

MauritiusGuinea-Bissau

NicaraguaLuxembourg

KazakhstanCyprus

Sri LankaNepal

SwazilandMauritania

ParaguayYemen

GuatemalaEcuador

PhilippinesSierra Leone

Egypt Arab Rep.Papua New Guinea

MalaysiaThailand

IndiaJordan

Dominican RepublicPakistan

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percentage

9

Tax as a percentage of handset cost Source: Deloitte analysis based on Tarifica, Wireless Intelligence and Deloitte tax data

Handset taxesThe jurisdictions with the highest tax, as a proportion of totalhandset cost, are Syria, Iran, Cameroon, Chad and Rwanda:

• Syria charges an average $24 in taxes, on top of 20% VATand 10% customs duty;

• Iran’s customs duties are 60%, by far the highest duties onmobile handsets within the sample of countries studied; and

• Cameroon has also some of the highest custom dutycharges, 32%, which are levied in addition to 19% VAT.

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Country

Albania

Bangladesh

DominicanRepublic

Greece

Iran

Italy

Jordan

Kenya

Nepal

Pakistan

Sri Lanka

Tanzania

Tunisia

Turkey

Uganda

Venezuela

Connection

$8.30 Fixed activation charges:mobile only

Fixed Taxes at subscription: $23.86Wireless usage and new subscriptionspecial communication tax (mobiletelephony only)

Subscription

Post pay $59/Prepay $7/Fixed $146:registration and subscriptioncharges

$11.76 Paid at subscription: mobileand fixed

2% Communications developmenttax – paid on usage andsubscription on mobile only

$1.92-$5.75 Subscriber’s specialduty. Varies based on the monthlyinvoice total

Fixed charges at subscription of:$4.44 for pre-pay/$135 for post-paid/$0.33 on fixed line. This includessubscription tax for pre-pay/post-paid and fixed line and aRural Areas Development tax forpost-paid

$6.82 Mobile specific stamp dutyon bills issued. Applies only onpost-paid services

4% special VAT due ontelecoms services: charged onmobile and fixed

10% Telecommunications Tax onusage: fixed and mobile

10% Telephone services charges –paid on usage only. Not applicableto subscription and applies to bothmobile and fixed

2.5% Mobile Subscription Levy paidon total value of monthly charges:mobile and fixed


5% Telecom Royalties: mobileand fixed

5% Special communication tax – onoverall usage and fees for mobilephones. Fixed telephony has a 15%rate of Special communication tax


$1.56-$6.25 Subscription Tax onmobiles and fixed

Handset

$3 Fixed charge on import of mobileand fixed handsets

$20.15 Telephone ownership fee:fixed and mobile

5% Telecoms Royalties: calculatedon cost of handset plus VAT

Telecommunications specific taxes

Telecommunication specific taxes

Source: Deloitte 2006

06


Mobile consumers pay higher taxesthan fixed20 markets demonstrated lower taxes on fixed telephony,the key differences being:

• A lower VAT rate or no VAT rate on fixed telephony servicese.g. Senegal, Mauritania and Pakistan;

• Lower ‘other taxes’ levied on fixed telephony, such as lower,or no, excise tax due on services e.g. Thailand, Kenya,Tanzania, Uganda, Zambia and Argentina; and

• Different levels of subscription/connection chargese.g. Albania.

Country

Albania

Argentina

Colombia

Dominican Republic

Egypt

Iran

Kenya

Mauritania

Nigeria

Pakistan

Senegal

Syria

Tanzania

Thailand

Turkey

Uganda

Ukraine

Zambia

Higher usage taxes on mobile than fixed

4% excise tax charged on mobile butnot fixed

20% VAT on mobile, 16% on fixed

No tax on fixed, 22% tax on mobile

15% sales tax on mobile, 5% on fixed

Higher subscription tax on mobilethan fixed

10% excise tax on mobile butnot on fixed

14% VAT on mobile but not on fixed

5% tax on mobile connections, no chargeon fixed

Activation taxes on mobile butnot on fixed

18% VAT on mobile none on fixed

3% consumption and expenditure taxon mobile, 2% on fixed

7% excise duty on mobile, none on fixed

10% excise duty on mobile but only 2%on fixed

Only 15% tax on both subscription andconsumption for fixed, but 25% tax forboth for mobile. There is also a newspecial subscription communication taxat a fixed rate on mobile, but not onfixed telephony

12% excise duty on mobile, 5% on fixed

7.5% pension fund charge on mobile,none on fixed

10% duty on mobile but none on fixed

Tax regime: fixed vs mobile

Countries with differing taxation regimesfor fixed and mobile telephony



Percentage increase in subscribers by 2010, following a 10%reduction in the level of telecoms specific taxes

0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8% 0.9% 1.0%

Kenya

Uganda

Tanzania

Tunisia

Jordan

Iran Islamic Rep.

Venezuela RB

Dominican Republic

Italy

Greece

Turkey

Albania

Sri Lanka

Pakistan

Nepal

Bangladesh

K

Change relative to base forecasts

07


08


Percentage increase in subscribers by 2010, following a 10%reduction in the value of VAT on usage and handset sales

Percentage increase in minutes of use by 2010, following a 10%reduction in the value of VAT on usage

Chan

geco

mpa

red

toba

sefo

reca

st

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

Mag

hreb

and

ME

Sub-

saha

ran

Afri

ca

Asia

Pacif

ic

CEE,

CIS,

Russ

ia

Latin

Am

erica

EU15

Chan

geco

mpa

red

toba

sefo

reca

st

Mag

hreb

and

ME

Sub-

saha

ran

Afri

ca

Asia

Pacif

ic

CEE,

CIS,

Russ

ia

Latin

Am

erica

EU15

0.0%

0.3%

0.6%

0.9%

1.2%

1.5%

Source: Deloitte 2006 Source: Deloitte 2006

09


With this in mind, one of the main objectives for us is to thinkabout how to provide access to the poor and how we can providetelecommunications services at affordable cost to the masses ofthe 6 billion world population instead of just the next billion. Webelieve that any taxation policy should be designed in a way thatdoes not add any further barriers to access or add to the cost ofservice provision for the poor, and should not deter or underminecompetitive market forces. Another important objective is thattaxation policies should ensure that the sector is always managedin a way that will achieve a level playing field and will allowequal distribution of services to all users of the population.

We do not believe that taxation should be designed on the basisof short-term considerations – it should be designed on the basisof achieving the best long-term economic interests for the societyand in a way that accelerates the extension of services to the poor.The indirect benefits to the economy of having affordable accessto telecommunications services far outweigh any short-termbenefit to the budget.”

The rate of other taxes applied to mobile consumers can differfrom other similar consumer goods. For example, excise duty inTurkey is levied at 6.7% for most electrical based consumer goodssuch as refrigerators and record players, whilst mobile phonesare treated as a luxury goods and the consumer must pay 20%in tax, the same rate levied on furs, caviar and precious stones.Such discrepancies tended to relate to a world where mobilephones were indeed a luxury, rather than today’s situation whereit is often the only means of communication available.

Consumers, particularly in developing countries, are price sensitive in relation to the uptakeand usage of mobile phones. Taxation levels and regulatory fees, are a key variable impactingupon the total cost of mobile ownership and use.

World Bank andUnited Nations perspective

“Mohsen A. Khalil – Director, GlobalInformation and CommunicationTechnologies, World Bank“The World Bank is in a position where we can act as afacilitator in dialogue – an ‘honest broker.’ In our policy andinvestment work, we are primarily concerned with the socialand economic interest accrued to the country as a whole.Social responsibility, poverty reduction and economic growthare the primary drivers for our policy considerations.

“Generally speaking, for any policy to be sustainable –for example, taxation – it has to balance the interestsof all stakeholders. That would mean governments,operators, investors/financiers, consumers and civil societyat large. Taxation has a large impact on access to mobilecommunications. We have factual data that demonstratesthe direct link between connectivity and economic growth,so achieving access at affordable prices to the broadest baseof the population is essential to driving economic growthand alleviating poverty.

“

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“Amir A. Dossal, Executive Director, UnitedNations Fund for International Partnerships(UNFIP)“Allowing easy access to timely and reliable information atlow cost, mobile communications offers a real opportunityto bridge the digital divide. Information and CommunicationTechnology (ICT) is a key tool for the achievement of theMillennium Development Goals – mobile communication candeliver affordable voice, data and internet services to billionsof people (it is estimated that more than 5 billion people willhave access to mobile communications by 2015 – double thenumber connected today). Bringing the benefits of mobilecommunications to those areas previously out of reach iscrucial for development. Affordability is a key element toachieving broad access to mobile technologies among the lessaffluent. Considering that over one billion people still live onless than $1 a day, to ensure access to information for all, thetotal cost of owning and using a mobile phone clearly needsto be decreased significantly.

The cost of owning and using a mobile phone could still bereduced by governments and regulators, by, for instance:

• Rationalisation of international and national policies andregulations applicable to communications;

• Adoption of policies that attract international operators toenter new national markets with minimal entry proceduresand costs, and encourage manufacturers to rationaliseproduction with lower costs; and

• Adoption of policies that reduce entry barriers to small butinnovative entrepreneurs, and encourage risk-taking for newentrants in national markets.

Governments, of course, could reduce barriers to entry bystreamlining regulatory and taxing policies, which would havea positive effect in increasing competition as well as reducinginitial investment and operating costs – with powerful forcestending to reduce the price to the consumer. In principle, thesemeasures should be of benefit to the broader economy and toentrepreneurial risk-taking and growth industries in particular,as this approach would tend to boost personal income anddemand for services.”

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The model was estimated at the jurisdiction level for101 jurisdictions across the world and then aggregated forpresentational purposes. In order to compare the impactof various tax changes:

• A base case scenario was created for all 101 jurisdictions,which projects for 5 years market development and taxrevenue collection, assuming application of the currenttaxation structure. External market projections and aneconometric model are used to forecast penetration rates,population, usage and handset sales; and

• All changes in penetration, handset sales, usage andGovernment tax revenue collection are compared to a basecase scenario.

The model estimates that reducing mobile specific taxes to 90%of their current level would significantly increase penetrationover and above the base case estimates by 2010.

The level of increase in subscribers relative to the base case in eachjurisdiction reflects both the nature and size of the mobile specifictax, the development of each jurisdictions mobile industry andeconomy and the different levels of price elasticity of demand.In addition to these impacts on the level of penetration, removingtelecommunications specific taxes also increases minutes of useand sales of handsets.

The reduction in mobile specific taxation approaches revenueneutrality in 14 of the 16 countries, as direct reductions inGovernment taxation revenue is counterbalanced by greaterVAT, corporation tax and growth across the economy.

Deloitte collected tax data through its’ international office network and constructed aneconomic model using Deloitte tax data, information from third party providers andassumptions verified by a major international telecoms provider. Deloitte also analysedpotential impact of changes in taxation using this model. The overall modelling approachadopted for this report is set out diagrammatically below.3Approach to modelling the impact of taxation changes

Tax ratesGeneralTelecom

GSTHandset

Current prices

Mobile prices

Demandequations

(penetration andusage)

Country characteristics

Impact of taxchange on mobile

usage (minutes and texts)

Impact of taxchange on mobile

penetration

Impact of taxchange on

demand for new handsets

Impact on government tax

revenues

Impact of taxchange on

company revenues

Impact on GDP

Regression

Tax on mobile services

Corporation tax licence fees

Additional tax revenues

Methodology

3 The economic modelling conducted as part of this project relies on a numberof assumptions as to the development of markets, population levels and thecontinuation of existing economic relationships. As with all such models theresults should therefore be regarded as indicative rather than definitive.

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Percentage change in government revenues from base case in 2010following a 10% reduction in the level of telecoms specific taxes

-2.0% -1.6% -1.2% -0.8% -0.4% 0.0%

Kenya

Uganda

Tanzania

Tunisia

Jordan

Iran Islamic Rep.

Venezuela RB

Dominican Republic

Italy

Greece

Turkey

Albania

Sri Lanka

Pakistan

Nepal

Bangladesh

K

Change relative to base forecasts0

The larger negative result for Greece is explained by limitedimpact on penetration in a saturated market. The result for Turkeyreflects its high reliance on mobile specific taxation relative toother countries. This results in an inability of the other economywide taxes to compensate for the loss of direct taxation income.In a simple static analysis this could be argued to make the caseagainst tax reform. However, a more dynamic analysis wouldneed to consider whether such a system provides the correctsignals and incentives for investment in the sector and acrossthe economy as a whole.

It is also important to note that these results underestimate theadditional impact of increased mobile operation on the remainderof the economy through local economic multipliers.

These findings confirm the views of many well knowninternational mobile operators.


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“Neil Gough, Director ofInternational Policy, Vodafone“As a mobile operator with broad international experience,Vodafone is concerned that some emerging markets may in factbe implementing taxation policy in ways which harm their ownlong-term interests. They often impose high, distortionary andregressive taxes. These reduce penetration and usage rates, reducethe economic growth which the mobile industry could otherwisebring, and impose an unfair tax burden on poorer users.

“There are a number of options that governments shouldconsider as a matter of urgency which address these negativeeffects, but still ensure the government can collect taxes. Theseoptions don’t need to involve sudden or drastic reductions intax revenues; they can instead involve a gradual restructuringof taxes that allows a similar amount of tax to be collected, butensure it is collected in a fairer and more efficient way.

“I should say that we understand why emerging marketgovernments have been tempted to levy high taxes on themobile market. When mobile was first introduced in emergingmarkets, mobile was considered to be a ‘luxury good’. Backthen mobile actually wasn’t such a bad thing to tax because itgenuinely was a luxury good available only to a few – it wasthe emerging market equivalent of yachts or caviar.

“The problem is that when you roll the clock forward tenyears, mobile is simply no longer a luxury good: it is themain communications service and a key enabler of economicdevelopment and social cohesion in emerging markets.We have to recognise the legacy of why we ended up in thisposition, recognise that those reasons are simply no longervalid. We need to move away from taxing mobile as a luxurygood before emerging markets seriously hinder their prospectsfor economic growth.

“In some of our markets, for example, Turkey, not only is therea high degree of taxation of communications services, but taxesare applied in a discriminatory manner: a higher rate is

imposed on mobile services than fixed line services. This createsdistortions in competition between fixed and mobile serviceswhich can have a very serious negative effect on the market.For example, one particular tax in Turkey is levied at a rateof 25% for mobile operators and 15% for fixed operators.That is a differential that is not insignificant, and which reducesthe ability of mobile operators to drive competition betweenfixed and mobile services – something that governments tellus they want as much as economic growth.

There is no question that the level of taxation in Turkey isextraordinarily high, and even more problematically, the way inwhich taxes are levied is regressive with high upfront fixed taxesimposed on SIM cards and joining a network. It is no accidentthat usage rates in Turkey are amongst the lowest in the world,and that mobile penetration rates are still some way short ofrates in comparable markets such as Eastern Europe.

Some countries – for example, India – have moved in the rightdirection by removing some of the licence and spectrum feesimposed on the mobile sector. They have deliberately done thisto enhance the affordability of services and help increasepenetration, which is one of their explicit policy objectives.

So, you need to examine not only the overall levels of tax buthow they are actually structured. For a country looking toincrease mobile penetration and benefit from the social andeconomic impact of mobile communications, applying handsetlevies is clearly not a sensible policy. Indeed, this is usuallyineffective because it only drives imports into the black market.There are plenty of options that governments should seriouslyconsider. I must stress that we are not suggesting that they needto immediately reduce taxes to zero. There are invariablyopportunities for governments to restructure taxes so that theycontinue to collect a similar absolute amount of tax from thecommunications sector, but do it in a much more efficient way.”

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“Chris Williams – Partner, EconomicConsulting, Deloitte & Touche LLP“This study identifies a series of key findings that Governmentsneed to take account of in developing their taxation andeconomic policy:

“• Taxes are significantly higher in many developing countriesthan those observed in many developed countries and 16countries levy telecom specific taxes on top of standard salesand import taxes on mobile phone users;

“• Reducing mobile specific taxes would increase penetration,usage and handset sales in the poorest regions of the world,with its strongest impacts felt in Sub-sahran Africa; and

“• Lower mobile specific taxes appear to have a limited impacton Government taxation revenues. Whilst the immediateimpact of lowering taxes lead to a decline in directGovernment revenues, these are mainly counterbalanced byindirect taxation (corporation tax and regulatory fees) andthe role of mobile communications as a driver of growth.

Whilst global mobile penetration level now stands at 40% thereremain large differences in penetration between developedcountries and many developing countries, where despite fastgrowth rates penetration is below 25%. More needs to be doneto increase these low rates, particularly in those countries wheremobile, as opposed to fixed line, is the main source universalaccess. In the light of the results of this study, Governmentsmay consider the impact of their tax policies on the growthof mobile communications. To achieve this, we would urgeGovernments and mobile operators to work together todetermine the economic impact of the sector, the ideal tax mixand how these combine to meet the objectives of their country.It appears that countries are more likely to reap the full socialand economic benefits available through such a joined upapproach and coherent economic thinking.”

At the World Summit on the Information Society in 2003, 175 countries signed up to acommitment to give more than half the world’s population access to information andcommunications technologies by 2015. Within four years market competition and privateinvestment has delivered this goal. The mobile industry provides access to more than80% of the world population and, by the end of 2007, 3 billion people will be connected.The World Bank maintains that whereas the first 3 billion connections will be market driventhe next 3 billion will be policy driven. One key policy tool that has an immediate impacton affordability is the level of taxation and this presents the potential to increase the mobilefranchise to poorer sections of society and to receiving the socio-economic benefits that result.

Conclusion

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About DeloitteDeloitte has the broadest and deepest range of skills ofany business advisory organisation. We are renownedfor our innovation, collaboration, our solutions-led approach,and our outstanding quality of client service.

The Deloitte Touche Tohmatsu (DTT) Technology, Media &Telecommunications (TMT) Industry Group consists of morethan 5,000 member firm partners, directors and senior managerssupported by thousands of other professionals.

TMT has dedicated practices in 45 countries, centres ofexcellence in the Americas, EMEA and Asia Pacific and servesover 90 percent of the TMT companies in the Fortune Global 500.

Clients include some of the world’s top software companies,computer manufacturers, wireless operators, satellite broadcasters,and advertising agencies – as well as leaders in publishing,telecommunications and peripheral equipment manufacturing.

The tax data collection and economic analysis for this report wasconducted by Deloitte & Touche LLP. The data and analysis issubject to assumptions and limitations which are highlighted invarious sections within the full report.

This information contained herein has been written in general terms andtherefore cannot be relied on to cover specific situations; application of theprinciples set out will depend upon the particular circumstances involved andwe recommend that you obtain professional advice before acting or refrainingfrom acting on any of the contents of this publication.Deloitte Touche Tohmatsu would be pleased to advise readers on how to applythe principles set out in this report to their specific circumstances. Deloitte ToucheTohmatsu accepts no duty of care or liability for any loss occasioned to any personacting or refraining from action as a result of any material in this report.Deloitte & Touche LLP refers to the United Kingdom limited liabilitypartnership, a member firm of DTT.

Acknowledgements

For further information, or if you would like to talk to one of ourexperts on Telecommunications or Tax matters please contact:

Global – John Ruffolo T + 1 416 601 6684E [email protected]

EMEA – Dennis Knowles T +44 20 7007 3822E [email protected]

Asia Pacific – Nigel Mellor T +65 6530 5523E [email protected]

Latin America – Carlos Ianucci T +54 11 4320 2736E [email protected]

Economic Consulting – Chris WilliamsT +44 20 7007 1071E [email protected]

Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, itsmember firms, and their respective subsidiaries and affiliates. Deloitte ToucheTohmatsu is an organisation of member firms around the world devoted toexcellence in providing professional services and advice, focused on clientservice through a global strategy executed in nearly 140 counties. With accessto the deep intellectual capital of approximately 135,000 people worldwide,Deloitte delivers services in four professional areas – audit, tax, consulting andfinancial advisory services – and delivers more than 80 percent of the world’slargest companies, as well as large national enterprises, public institutions,locally important clients, and successful, fast-growing global growth companies.Services are not provided by the Deloitte Touche Tohmatsu Verein, and, forregulatory and other reasons, certain member firms do not provide services inall four professional areas.As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any ofits member firms has any liability for each other’s acts or omissions. Each of themember firms is a separate and independent legal entity operating under thenames “Deloitte”, “Deloitte & Touche”, “Deloitte Touche Tohmatsu”, or otherrelated names.

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The GSMAssociation (GSMA) is the global trade associationrepresenting more than 700 GSM mobile operator Membersacross 218 countries and territories of the world. In addition,over 190 Associate Members (manufacturers and suppliers)support the Association’s initiatives as key partners.

Encompassing technical, commercial and public policy initiatives,the GSMA focuses on ensuring wireless services work globally;thereby enhancing the value of mobile services to individualcustomers and national economies while creating new businessesopportunities for operators and their suppliers.

For further information contact:

Mark Smith / David PringleGSMAssociation

Tel: +44 78 50 22 97 24 / +44 79 57 55 60 69Email:[email protected]

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Wireless Intelligence is a comprehensive database on theglobal mobile market. It covers all mobile technologiesand includes over a million individual data points across600 operators, 1,100 networks in 220 countries. Because of aneed for an up-to-date and accurate view of the global mobilemarkets, the GSMAssociation formed a unique partnershipwith Ovum, the leading industry analyst firm.

Through the GSMA, the majority of the world’s operators haveaccess to their own data and, with over 40,000 database queries bymembers in 2006, this makes Wireless Intelligence one of the mostreferenced sources of its kind in the world.

Wireless Intelligence provides operator data across operationaland financial metrics and allows analysis at an operator, country,regional or global level. The metrics in the service cover subscriberconnections, growth rates, technology market shares as well as arange of operational metrics such as churn, minutes of use andfinancial metrics including revenue, capex and EBITDAmargin.

Acknowledgements

Since 1976, Tarifica has been providing clear, up-to-date andaccurate tariff information to network operators, regulatorsand financial institutions.

Our global, multilingual team of researchers constantly monitorsand reports on the ever-changing tariff environment whether forvoice, data, Internet or video services. Coverage is comprehensivewith Tarifica’s databases containing the Fixed and Mobile tariffsfor over 400 operators in 130 countries.

In-depth comparisons are easily obtained from quarterly pricingbenchmarks of European, Middle-Eastern and Asia-Pacificmarkets. The most important tariff developments worldwide areanalysed in a weekly newsletter which has become the must-readpublication for service provider pricing specialists.Contact: John Lilley – Tel: +44 (0)207 692 5287,[email protected].

To download a full copy of the report visitwww.gsmworld.com/tax

For more information contact:

GSMALondon Office1st Floor Mid City Place71 High HolbornLondon WC1V 6EAUnited Kingdom

Tel: +44 (0)20 7759 2300Email: [email protected]

www.gsmworld.com

GSMADublin OfficeBlock 2Deansgrange Business ParkDeansgrangeCo. Dublin Ireland

Tel: +353 (0)1 289 1800