Article - 2 PDF

The Impact of Taxation on the Development of the
Mobile Broadband Sector

Authors: Dr. Raul L. Katz
Dr. Ernesto Flores-Roux
Dr. Judith Mariscal
ABSTRACT
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Increase in Wireless Penetration Resulting Increase in Wireless User Base Resulting

from Changes in Taxation from Changes in Taxation
(in percentage points) (in percentage)
30.0 300.0 276.2
25.0 24.0 250.0

200.8
20.0 200.0
15.0 150.0
11.4
10.0 9.0 100.0
4.6 45.7 40.3
5.0 50.0
0.9 1.3 4.3
0.4 0.4 0.1 4.0 3.2 2.9 4.0
0 0
Mexico Brazil Bangladesh South Africa Malaysia Mexico Brazil Bangladesh South Africa Malaysia
Reduction of 1 p.p. Reduction to benchmark rate Reduction of 1 p.p. Reduction to benchmark rate
Note: Malaysia is considered to be the benchmark at 6.1%

The Impact of Taxation on the Development of the Mobile Broadband Sector
Table of Contents
$
Executive Summary 2
1. Background And Study Objectives 9
2. A Typology Of Mobile Taxation 11
3. Cross-Sectional Analysis Of Taxation Impact On Mobile Broadband 16
4. Case Studies On Mobile Broadband Taxation 19

4.1. Mexico 19
4.2. Malaysia 19
4.3. Brazil 20
4.4. Bangladesh 21
4.5. South Africa 21
5. Quantitative Assessment Of Impact Of Taxation On Mobile Broadband And The Economy 23

5.1. Theoretical framework 23
5.2. Economic impact of broadband 24
5.3. Economic impact of taxation on mobile broadband 25
6. Policy Implications 31
Appendices 35
A. Study team 36
B. Database of taxation approaches 37
C. Case studies: country context 43
D. Economic impact of broadband 51
E. Economic impact model assumptions 54
F. Bibliography 56
1
Executive Summary
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Figure A. Mobile Service Taxation Approaches
Service taxation
Universalization Direct taxation Direct taxation and Service tax
of service without sector sector specific taxes revenue
discrimination maximization
Sector discrimination
based on moderate
import duty and telecom Malaysia South Africa Mexico Tanzania
Handset taxation
tax
Sector discrimination China

based on high import
duty but no telecom tax Argentina Venezuela
Sector discrimination Yemen

based on high VAT and
import duty but low Turkey
handset specific tax
Handset tax revenue Brazil Bangladesh

maximization
Universalization and Protectionism Sector distortion Tax maximization and sector distortion
protectionism
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Figure C. Economic Development and Mobile Penetration
(*) (2009)
Figure B. Mobile Penetration (2Q09)
150%
150%
Malaysia
Wireless penetration (%)
113% S. Africa
113%
104.6 104.2
88.2 75% Brazil Mexico
75% 84.3
38% 38% Bangladesh

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Post Paid Source: ITU; Wireless Intelligence; Merrill Lynch; World Bank; TAS analysis
Source: ITU; Wireless Intelligence; Merrill Lynch; World Bank; TAS analysis
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Figure E. Taxation Approach to Wireless Services in the five countries under study
Services Handset
Country VAT Other Fixed Customs Other Fixed Taxation Approach
VAT
Taxes Taxes Duty Taxes Taxes
Malaysia 5% --- --- 10% --- --- --- Universalization and
protectionism
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Brazil 33% 5.1% --- 33% 19% 9.30% $13.35 Tax maximization and
sector distortion
Bangladesh 15% 35% $11.76 15% 12% --- $11.63
(*) Applies to all telecommunications services except for fixed and mobile broadband
Source: Deloitte (2008); updated by TAS
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Examples of sources are Economist Intelligence Unit, Business Environment Risk Intelligence, WEF, World Bank
4
Among many other criteria, it explicitly captures the efficiency of fiscal policy, and thus, can be considered as a guideline on how well governments
will spend taxation on telecommunications services. It also captures the efficiency of fiscal policy (taxes and spending) as it identifies the effect of the
following variables:
s #ONSISTENCY BETWEEN PLANNING AND SPENDING EXECUTION
s %FlCIENCY OF REVENUE MOBILIZATION PUBLIC EXPENDITURES
s "UDGET MANAGEMENT
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6 economic spill-over of broadband
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Taxation and the growth of mobile in East Africa (2007) and AT Kearney. Asia Pacific Mobile Observatory (2009)
8
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Figure 2. Service Taxation Approaches

China South Africa Turkey
Mexico
Telecom-Specific Fixed taxes
None Low High None Low High
None
VAT Low
High
Brazil Argentina Bangladesh

9
See all raw data on taxation approaches by country in Appendix B. 11
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Figure 3. Service Taxation Approaches by Country
Continent Universalization of Direct taxation Direct taxation and Service tax revenue
service without sector sector specific taxes maximization
discrimination
Africa Angola, Botswana, Cameroon, Chad, Cote Burkina Fasso, Ghana, Kenya, Madagascar,
Lesotho, S. Leone, D)VOIRE $2 #ONGO %GYPT Nigeria, Rep. Congo, Senegal, Tanzania,
Swaziland Ethiopia, Gabon, Gambia, Tunisia Uganda, Zambia
Guinea, Guinea Bissau,
Malawi, Mauritania,
Mauritius, Morocco,
Mozambique, Rwanda,
Seychelles, S. Africa,
Zimbabwe
Middle East Syria, Yemen Iran, Jordan Turkey
Asia Pacific Bhutan, China, Indonesia, India, Philippines, Samoa Cambodia, Sri Lanka Bangladesh, Nepal,
Lao, Malaysia, Myanmar, Pakistan
P. N. Guinea, Thailand,
Vietnam
Latin America Paraguay Bolivia, Chile, Guatemala, Argentina, Brazil, Dominican Republic,
Nicaragua, Peru, Trinidad Colombia , Mexico Ecuador, Venezuela
& Tobago
Eastern Europe Azerbaijan, Georgia, Albania, Ukraine
Kazkhstan, Russia,
Uzbekistan
Western Europe Austria, Bulgaria, Cyprus, Greece
Czeck Rep., Denmark,
Estonia, France, Finland,
Germany, Hungary, Ireland,
Italy, Latvia, Lithuania,
Luxembourg, Malta,
Netherlands, Poland,
Portugal, Romania,
Slovakia, Slovenia, Spain,
Sweden, UK
3URFHHGLQJQRZWRKDQGVHWWD[DWLRQDSSURDFKHVIRXU $ $8%/+,&- 5#'/&#6#"(+#,"- 9('%5- ,"- 3#<3- HEL- ("5-

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Figure 4. Handset Taxation Approaches

S. Africa Turkey
Customs Duty Telecom-specific
None Low High None Low High
None None
VAT Low Fixed Low
High High
Mexico Argentina Bangladesh Brazil
!"#$ 0()+$ %'#4/5#3+$ "/3-)#+$ +/2/+,(3$ 0(-#5$ /'(&3-$ FDVHV ORZ VHFWRU GLVFULPLQDWLRQ WKURXJK PRGHUDWH
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Figure 5. Handset Taxation Approaches by Country
Continent Sector discrimination Sector discrimination Sector discrimination Handset revenue

based on moderate based on high import based on high VAT and maximization
import duty duty import duty but low
Africa Angola, Egypt, Ethiopia, Cameroon, Chad, DR Botswana, Burkina Fasso, Ghana, Nigeria, Lesotho
Gabon, Guinea-Bissau, Congo, Gambia, Guinea, #OTE D)VOIRE -ADAGASCAR
Kenya, Mauritania, Malawi, rep. Congo, Mozambique, Senegal,
Mauritius, Morocco, Rwanda Tunisia
Seychelles, S. Leone,
S. Africa, Swaziland,
Tanzania, Uganda, Zambia,
Zimbabwe
Middle East Jordan Turkey, Yemen Syria
Asia Pacific Cambodia, Lao, Malaysia, Bhutan, China, Indonesia, India, Nepal Bangladesh
Myanmar, P. N. Guinea, Samoa, Sri Lanka
Pakistan, Philippines,
Thailand, Thailand, Vietnam
Latin America Bolivia, Chile, Colombia, Argentina, Trinidad & Brazil
D. Republic, Ecuador, Tobago, Venezuela
Guatemala, Nicaragua,
Paraguay, Perú, México
Eastern Europe Albania, Kazakhstan, Azerbaijan, Georgia
Russia, Ukraine, Uzbekistan
Czech Rep., Denmark,
Germany, Greece, Hungary,
Ireland, Italy, Latvia,
Lithuania, Luxembourg,
Malta, Netherlands,
Poland, Portugal, Romania,
Sweden, UK
13
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RZQHUVKLS
Figure 6. Combined taxation approaches
Service taxation
Universalization Direct taxation Direct taxation and Service tax
of service without sector sector specific taxes revenue
discrimination maximization
Sector discrimination
based on moderate
import duty and telecom Malaysia South Africa Mexico Tanzania
Handset taxation
tax
Sector discrimination China

based on high import
duty but no telecom tax Argentina Venezuela
Sector discrimination Yemen

based on high VAT and
import duty but low Turkey
Handset tax revenue Brazil Bangladesh

maximization
Universalization and Protectionism Sector distortion Tax maximization and sector distortion
protectionism
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Figure 7. Combined Taxation Approach by Country
Continent Universalization and Protectionism Sector distortion Tax maximization and

protectionism sector distortion
Africa Angola, Botswana, Lesotho, Cameroon, Chad, Cote Kenya, Tanzania, Uganda, Burkina Faso, Ghana,
S. Leone, Swaziland D)VOIRE $2 #ONGO %GYPT Zambia Madagascar, Nigeria,
Ethiopia, Gabon, Gambia, Senegal, Tunisia
Guinea, Guinea-Bissau,
Madagascar, Mauritania,
Mauritius, Morocco,
Mozambique, Rwanda,
Seychelles, S. Africa,
Zimbabwe
Middle East Syria, Yemen Jordan Iran, Turkey
Asia Pacific Bhutan, China, , Indonesia, India, Philippines, Samoa Cambodia Bangladesh, Nepal,
Lao, Malaysia, Myanmar, Pakistan, Sri Lanka
P. New Guinea, Thailand,
Vietnam
Latin America Paraguay Bolivia, Chile, Guatemala, Dominican Rep., Ecuador, Argentina, Brazil, Venezuela
Nicaragua, Perú, Trinidad & Mexico, Colombia
Tobago
Eastern Europe Azerbaijan, Georgia, Albania , Ukraine
Kazakhstan, Russia,
Uzbekistan
Czech Rep., Denmark,
Germany, Hungary, Ireland,
Italy, Latvia, Lithuania,
Luxembourg, Malta,
Netherlands, Poland,
Portugal, Romania,
Sweden, UK
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3. Cross-Sectional Analysis Of Taxation Impact On Mobile Broadband
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RI KRXVHKROGV DQG %DQJODGHVK RI
150% SRSXODWLRQ RI KRXVHKROGV 7KHVH VWDWLVWLFV
LQGLFDWHWKHZLGHJDSH[LVWLQJEHWZHHQWKHGHYHORSHG
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104.6 104.2
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38% Continent/Country Population

28.6 Penetration
0% Western Europe 25.0 %
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la Af Me
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Mexico 7.05 %
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Malaysia 4.78 %
:KHQUHODWHGWRWKHOHYHORIHFRQRPLFGHYHORSPHQW Brazil 5.20 %

%DQJODGHVK %UD]LO DQG 0H[LFR KDYH D ZLUHOHVV South Africa 0.80 %
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Sources: ITU; Euromonitor; World Bank; TAS analysis
Figure 9. Mobile Subscribers and Economic Development &RJQL]DQW RI WKLV ZLGH GLVSDULW\ WKH JRYHUQPHQWV
within Emerging Countries (2009)
LQ DOO ÀYH FRXQWULHV VWXGLHG DUH LQ WKH FRXUVH RI
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16
,Q 6RXWK $IULFD WKH EURDGEDQG SROLF\ LV OHVV Figure 11. Mobile data as a percentage of service revenues
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Figure 13. Mobile Taxation approaches in the five countries under study
Services Handset
Country VAT Other Fixed Customs Other Fixed Taxation Approach
VAT
Taxes Taxes Duty Taxes Taxes
Malaysia 5% --- --- 10% --- --- --- Universalization and
protectionism
South Africa 14% --- --- 14% 7.60% --- --- Protectionism
Mexico 16% 3% (*) --- 16% 0.10% --- --- Sector distortion
Brazil 33% 5.1% --- 33% 19% 9.30% $13.35 Tax maximization and
sector distortion
Bangladesh 15% 35% $11.76 15% 12% --- $11.63
(*) Applies to all telecommunications services except for fixed and mobile broadband
Source: Deloitte (2008); updated by TAS
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Figure 14. Taxation vs. Adoption of Data Services
50%
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Malaysia
Mexico
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Brazil
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South Africa
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0 15.0 30.0 45.0 60.0
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Source: Deloitte (2008); Merrill Lynch; TAS analysis
18 10
In the case of mobile broadband in Mexico the impact of taxes on total cost of ownership is 16.1% since some levies do not apply
4. Case Studies On Mobile Broadband Taxation
4.1. Mexico
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Figure 20. 3G Penetration Vs. Handset Taxes Figure 21. Overall Total Cost of Mobile Ownership in
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Results included in appendix E.
93$ /--,+,(3$ +($ 0#/)&',38$ ,0%/1+$ (3$ #1(3(0,1$ Figure 25. OECD: Percentage of Impact of Broadband on
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26
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Figure 36: Impact on tax revenue (negative numbers
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Figure 33: Impact on tax revenue (negative numbers 0.17 % 0.60 % 1.38 %
represent foregone taxes) (in US$ million)
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GDP Elasticity
0.17 % 0.60 % 1.38 %
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elasticity
1.2 $ (36) $ 36 $ 156
27
Figure 37: Accumulated return required on each tax dollar 5.3.4. Bangladesh
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Figure 39: Impact on tax revenue: From 43.3% to 6.1% (3$+",)$'#%('+7$!",)$,)$#2%5/,3#-$6.$+"#$)0/55$),<#$(*$
(negative numbers represent foregone taxes) (in US$ 0(6,5#$ 6'(/-6/3-$ ,3$ ,+)$ #/'5.$ )+/8#)7$ !"#)#$ #**#1+)$
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GDP Elasticity
Figure 40: Accumulated return required on each tax dollar
for wealth creation neutrality: From 43.3% to 6.1% 0.17 % 0.60 % 1.38 %
Penetration 0.6 .!14
$ 11.4 $ 26.2
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14
The methodology used to estimate the impact on GDP of broadband developed for this study assumes the existence of a customer base of reasonable
28 size. Growth in the initial stages (sometimes well above 500%) falls beyond the range for which the parameter we estimated has any applicability.
Figure 42: Impact on tax revenue (negative numbers Figure 46: Accumulated return required on each tax dollar
represent foregone taxes) (in US$ million) for wealth creation neutrality: From 54.8% to 6.1%
GDP Elasticity GDP Elasticity

0.17 % 0.60 % 1.38 % 0.17 % 0.60 % 1.38 %
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1.2 .! $ 2.4 $ 4.9 1.2 .$ $ 2.0 $ 4.6
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(negative numbers represent foregone taxes) (in US$
million) GDP Elasticity
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0.17 % 0.60 % 1.38 % elasticity 1.2 $ 180 $ 583 $ 1,342
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15
The “accumulated return” is negative because applying a tax of 53.8% to mobile broadband services allows the government to directly collect more
taxes than applying a tax rate of 54.8%. This is a typical example of higher tax rates decreasing tax collection, without the consideration of the overall
impact on the economy. 29
Figure 48: Impact on tax revenue (negative numbers Figure 52: Accumulated return required on each tax dollar
represent foregone taxes) (in US$ million) for wealth creation neutrality: From 14.9% to 6.1%
GDP Elasticity GDP Elasticity

0.17 % 0.60 % 1.38 % 0.17 % 0.60 % 1.38 %
Penetration 0.6 $ (37) $3 $ 103 Penetration 0.6 $ 1.8 $ 4.1 $ 9.3
elasticity elasticity
1.2 $ (6) $ 101 $ 303 1.2 $ 2.7 $ 9.9 $ 22.9

for wealth creation neutrality
GDP Elasticity
0.17 % 0.60 % 1.38 %
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elasticity 1.2 $ 3.4 $ 10.8 $ 24.9
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Figure 51: Impact on tax revenue: From 14.9% to 6.1%

(negative numbers represent foregone taxes) (in US$
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GDP Elasticity
0.17 % 0.60 % 1.38 %
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elasticity 1.2 $ (164) $ 960 $ 2,987
30
6. Policy Implications
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Figure 53. Increase in Wireless Penetration Resulting from

Changes in Taxation (in percentage points)
30.0 300.0
25.0 24.0 250.0
20.0 200.0
15.0 150.0
11.4
10.0 9.0 100.0
4.6
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0.9 1.3
0.4 0.4 0.1
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Mexico Brazil Bangladesh South Africa Malaysia Mexico Brazil Bangladesh South Africa Malaysia
Reduction of 1 p.p. Reduction to benchmark rate
31
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Figure 54. List of Countries whose taxation policies might impact the diffusion of mobile broadband
Sector distortion Tax maximization and sector distortion
Africa Kenya, Tanzania, Uganda, Zambia Burkina Faso, Ghana, Madagascar,

Nigeria, Senegal, Tunisia
Middle East Jordan Iran, Turkey
Asia Pacific Cambodia Bangladesh, Nepal, Pakistan, Sri Lanka
Latin America Dominican Rep., Ecuador, Mexico, Argentina, Brazil, Venezuela
Colombia
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A. Study team
B. Database of taxation approaches
C. Case studies
D. Economic impact of broadband
E. Economic impact model assumptions
F. Bibliography
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B. Database of taxation approaches
1. Taxes on Services
VAT or
Other Fixed taxes
similar VAT Specific Fixed Matrix 1 Concatenate Group
Taxes (US$)
taxes
(1) (2) (3) (4) (5) (6) (7) (8) (9)

AFRICA
Angola 5.0% 1 0 0 10 100 Grupo 1
Botswana 10.00% 1 0 0 10 100 Grupo 1
Burkina Faso 18.00% 0.04-0.10 2 0 2 20 202 Grupo 3
Cameroon 19.25% 2 0 0 20 200 Grupo 2
Chad 18.00% 2 0 0 20 200 Grupo 2
#OTE D)VOIRE 18.00% 2 0 0 20 200 Grupo 2
DRCongo 18.00% 2 0 0 20 200 Grupo 2
Egypt 15.00% 2 0 0 20 200 Grupo 2
Ethiopia 15.00% 2 0 0 20 200 Grupo 2
Gabon 18.00% 2 0 0 20 200 Grupo 2
Gambia 18.00% 2 0 0 20 200 Grupo 2
Ghana 12.50% 2.50% 2 1 0 21 210 Grupo 3
Guinea 18.00% 2 0 0 20 200 Grupo 2
Guinea-Bissau 15.00% 2 0 0 20 200 Grupo 2
Kenya 16.00% 10.00% 2 2 0 22 220 Grupo 4
Lesotho 5.00% 1 0 0 10 100 Grupo 1
Madagascar 18.00% 8.00% 2 2 0 22 220 Grupo 4
Mauritania 14.00% 2 0 0 20 200 Grupo 2
Mauritius 15.00% 2 0 0 20 200 Grupo 2
Morocco 20.00% 2 0 0 20 200 Grupo 2
Mozambique 17.00% 2 0 0 20 200 Grupo 2
Nigeria 5.00% 8.00% 1 2 0 12 120 Grupo 3
Rwanda 18.00% 2 0 0 20 200 Grupo 2
Senegal 18.00% 7.18 2 0 2 20 202 Grupo 4
Seychelles 17.60% 2 0 0 20 200 Grupo 2
Sierra Leone 10.00% 1 0 0 10 100 Grupo 1
South Africa 14.00% 2 0 0 20 200 Grupo 2
Swaziland 0 0 0 00 000 Grupo 1
Tanzania 20.00% 7.00% 2 2 0 22 220 Grupo 4
Tunisia 18.00% 5.00% 2 1 0 21 210 Grupo 3
Uganda 18.00% 12.00% 2 2 0 22 220 Grupo 4
Zambia 17.50% 10.00% 2 2 0 22 220 Grupo 4
Zimbabwe 15.00% 2 0 0 20 200 Grupo 2
Note: Columns (4), (5) and (6) represent codes defined according to tax levels of columns (1), (2) and (3); columns (8) and (9) combine codes and
determine the type of taxation approach by country: Group 1 (Universalization of Services); Group 2 (Direct taxation without sector discrimination);
Group 3 (Direct taxation and sector specific taxes); Group 4 (Maximize tax revenues).
37
VAT or
Other Fixed taxes
Taxes (US$)
taxes
MIDDLE EAST
Iran 6.00% 4.33 for pre- 1 0 2 10 102 Grupo 3
Jordan 16.00% 4.00% 2 1 0 21 210 Grupo 3
Syria 3.00% 1 0 0 10 100 Grupo 1
Turkey 18.00% 25.00% 23.86 2 2 2 22 222 Grupo 4
Yemen 10.00% 1 0 0 10 100 Grupo 1
ASIA PACIFIC
Bangladesh 15.00% 35.00% 11.76 2 2 2 22 222 Grupo 4
Bhutan 0 0 0 00 000 Grupo 1
Cambodia 10.00% 3.00% 1 1 0 11 110 Grupo 3
China 3.00% 1 0 0 10 100 Grupo 1
India 12.24% 2 0 0 20 200 Grupo 2
Indonesia 10.00% 1 0 0 10 100 Grupo 1
Lao 10.00% 1 0 0 10 100 Grupo 1
Malaysia 5.00% 1 0 0 10 100 Grupo 1
Myanmar 0.00% 0 0 0 00 000 Grupo 1
Nepal 13.00% 10.00% 20.15 2 2 2 22 222 Grupo 4
Pakistan 15.00% 8.30 2 0 2 20 202 Grupo 4
Papua New Guinea 10.00% 1 0 0 10 100 Grupo 1
Philippines 12.00% 2 0 0 20 200 Grupo 2
Samoa 12.50% 2 0 0 20 200 Grupo 2
Sri Lanka 15.00% 2.50% 2 1 0 21 210 Grupo 3
Thailand 7.00% 1 0 0 10 100 Grupo 1
Vietnam 10.00% 1 0 0 10 100 Grupo 1
LATIN AMERICA
Argentina 21.00% 4.00% 2 1 0 21 210 Grupo 3
Bolivia 13.00% 2 0 0 20 200 Grupo 2
Brazil 33.00% 3.00% 2 1 0 21 210 Grupo 3
Chile 19.00% 2 0 0 20 200 Grupo 2
Colombia 20.00% 2 0 0 20 200 Grupo 2
Dominican Republic 16.00% 12.00% 2 2 0 22 220 Grupo 4
Ecuador 12.00% 15.00% 2 2 0 22 220 Grupo 4
Guatemala 12.00% 2 0 0 20 200 Grupo 2
Mexico 16.00% 3.00% 2 1 0 21 210 Grupo 3
Nicaragua 15.00% 2 0 0 20 200 Grupo 2
Paraguay 10.00% 1 0 0 10 100 Grupo 1
Peru 19.00% 2 0 0 20 200 Grupo 2
Trinidad and Tobago 15.00% 2 0 0 20 200 Grupo 2
Venezuela 14.00% 1.56-6.25 2 0 2 20 202 Grupo 4
38
VAT or
Other Fixed taxes
Taxes (US$)
taxes
RUSSIA/CIS/CENTRAL AND EASTERN EUROPE
Albania 20.00% Post pay 59 2 0 2 20 202 Grupo 4
Azerbaijan 18.00% 2 0 0 20 200 Grupo 2
Georgia 18.00% 2 0 0 20 200 Grupo 2
Kazakhstan 15.00% 2 0 0 20 200 Grupo 2
Russia 18.00% 2 0 0 20 200 Grupo 2
Ukraine 20.00% 7.50% 2 2 0 22 220 Grupo 4
Uzbekistan 20.00% 2 0 0 20 200 Grupo 2
WESTERN EUROPE
Austria 20.00% 2 0 0 20 200 Grupo 1
Bulgaria 20.00% 2 0 0 20 200 Grupo 1
Cyprus 15.00% 2 0 0 20 200 Grupo 1
Czech Republic 19.00% 2 0 0 20 200 Grupo 1
Denmark 25.00% 2 0 0 20 200 Grupo 1
Estonia 18.00% 2 0 0 20 200 Grupo 1
France 19.60% 2 0 0 20 200 Grupo 1
Finland 22.00% 2 0 0 20 200 Grupo 1
Germany 16.00% 2 0 0 20 200 Grupo 1
Greece 19.00% 1.92-5.75 2 0 2 20 202 Grupo 4
Hungary 20.00% 2 0 0 20 200 Grupo 1
Ireland 21.00% 2 0 0 20 200 Grupo 1
Italy 20.00% 2 0 0 20 200 Grupo 1
Latvia 18.00% 2 0 0 20 200 Grupo 1
Lithuania 18.00% 2 0 0 20 200 Grupo 1
Luxembourg 15.00% 2 0 0 20 200 Grupo 1
Malta 18.00% 2 0 0 20 200 Grupo 1
Netherlands 19.00% 2 0 0 20 200 Grupo 1
Poland 22.00% 2 0 0 20 200 Grupo 1
Portugal 21.00% 2 0 0 20 200 Grupo 1
Romania 19.00% 2 0 0 20 200 Grupo 1
Slovakia 19.00% 2 0 0 20 200 Grupo 1
Slovenia 20.00% 2 0 0 20 200 Grupo 1
Spain 16.00% 2 0 0 20 200 Grupo 1
Sweden 25.00% 2 0 0 20 200 Grupo 1
UK 17.50% 2 0 0 20 200 Grupo 1
39
2. Taxes on handsets
VAT or
Custom Other Fixed taxes Group
similar VAT Customs Fixed Telecoms Matrix 1 Matrix 2 Filter
Duty* Taxes (US$) Name
taxes
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
AFRICA
Angola 10.00% 5.00% 1 1 0 0 11 00 1100 Grupo 1
Botswana 10.00% 7.00% 1 0 0 2 10 02 1002 Grupo 3
Burkina Faso 18.00% 13.30% 1.00% 2 2 0 1 22 01 2201 Grupo 3
Cameroon 19.25% 29.90% 2 2 0 0 22 00 2200 Grupo 2
Chad 18.00% 28.50% 2 2 0 0 22 00 2200 Grupo 2
#OTE D)VOIRE 18.00% 5.00% 2.50% 2 1 0 1 21 01 2101 Grupo 3
DRCongo 13.00% 19.00% 2 2 0 0 22 00 2200 Grupo 2
Egypt 10.00% 1 0 0 0 10 00 1000 Grupo 1
Ethiopia 15.00% 10.00% 2 1 0 0 21 00 2100 Grupo 1
Gabon 18.00% 9.50% 2 1 0 0 21 00 2100 Grupo 1
Gambia 15.00% 20.00% 2 2 0 0 22 00 2200 Grupo 2
Ghana 12.50% 9.50% 5.50% 2 1 0 2 21 02 2102 Grupo 3
Guinea 18.00% 11.90% 2 2 0 0 22 00 2200 Grupo 2
Guinea-Bissau 15.00% 2 0 0 0 20 00 2000 Grupo 1
Kenya 16.00% 2 0 0 0 20 00 2000 Grupo 1
Lesotho 14.00% 0.00% 7.00% 2 0 0 2 20 02 2002 Grupo 3
Madagascar 18.00% 9.50% 3.00% 2 1 0 1 21 01 2101 Grupo 3
Mauritania 14.00% 2 0 0 0 20 00 2000 Grupo 1
Mauritius 15.00% 2 0 0 0 20 00 2000 Grupo 1
Morocco 20.00% 2.50% 2 1 0 0 21 00 2100 Grupo 1
Mozambique 17.00% 25.00% 1.00% 2 2 0 1 22 01 2201 Grupo 3
Nigeria 5.00% 9.50% 7.50% 1 1 0 2 11 02 1102 Grupo 3
Rwanda 18.00% 30.00% 2 2 0 0 22 00 2200 Grupo 2
Senegal 18.00% 10- 1.50% 2 2 0 1 22 01 2201 Grupo 3
20.00%
Seychelles 12.00% 0 2 0 0 02 00 0200 Grupo 2
Sierra Leone 10.00% 1 0 0 0 10 00 1000 Grupo 1
South Africa 14.00% 7.60% 2 1 0 0 21 00 2100 Grupo 1
Swaziland 14.00% 0 2 0 0 02 00 0200 Grupo 2
Tanzania 20.00% 2 0 0 0 20 00 2000 Grupo 1
Tunisia 10.00% 8.00% 1 0 0 2 10 02 1002 Grupo 3
Uganda 18.00% 2 0 0 0 20 00 2000 Grupo 1
Zambia 17.50% 4.80% 2 1 0 0 21 00 2100 Grupo 1
Zimbabwe 15.00% 2 0 0 0 20 00 2000 Grupo 1
Note: Columns (5), (6), (7) and (8) represent codes defined according to tax levels of columns (1), (2), (3) and (4); columns (9), (10) and (11) combine
codes and determine the type of taxation approach by country: Group 1 (Sector discrimination limited to import duty); Group 2 (Sector discrimination
based on moderate duty and telecom tax); Group 3 (Sector discrimination based on handset specific tax); Group 4 (Maximize tax revenues).
40
VAT or
taxes
MIDDLE EAST
Iran 60.00% 0 2 0 0 02 00 0200 Grupo 2
Jordan 0.00% 0.00% 0 0 0 0 00 00 0000 Grupo 1
Syria 20.00% 10.00% 14.38-33.67 2 1 2 0 21 20 2120 Grupo 3
Turkey 18.00% 20.00% 2 0 0 2 20 02 2002 Grupo 3
Yemen 5.00% 5.00% 3.00% 1 1 0 1 11 01 1101 Grupo 3
ASIA PACIFIC
Bangladesh 15.00% 12.00% 11.63 2 2 2 0 22 20 2220 Grupo 4
Bhutan 10.00% 30.00% 1 2 0 0 12 00 1200 Grupo 2
Cambodia 10.00% 10.00% 1 1 0 0 11 00 1100 Grupo 1
China 17% or 20.00% 2 2 0 0 22 00 2200 Grupo 2
3%
India 4.00% 13.00% 1.36 1 2 1 0 12 10 1210 Grupo 3
Indonesia 10.00% 18.00% 1 2 0 0 12 00 1200 Grupo 2
Lao 10.00% 10.00% 1 1 0 0 11 00 1100 Grupo 1
Malaysia 10.00% 1 0 0 0 10 00 1000 Grupo 1
Myanmar 0.00% 21.00% 0 2 0 0 02 00 0200 Grupo 2
Nepal 13.00% 5.00% 1.50% 2 1 0 1 21 01 2101 Grupo 3
Pakistan 6.00 0 0 1 0 00 10 0010 Grupo 3
Papua New Guinea 10.00% 0.00% 1 0 0 0 10 00 1000 Grupo 1
Philippines 12.00% 2 0 0 0 20 00 2000 Grupo 1
Samoa 12.50% 20.00% 2 2 0 0 22 00 2200 Grupo 2
Sri Lanka 33.00% 0 2 0 0 02 00 0200 Grupo 2
Thailand 7.00% 1 0 0 0 10 00 1000 Grupo 1
Vietnam 10.00% 7.50% 1 1 0 0 11 00 1100 Grupo 1
LATIN AMERICA
Argentina 21.00% 0%-20% 2 2 0 0 22 00 2200 Grupo 2
Bolivia 13.00% 10.00% 2 1 0 0 21 00 2100 Grupo 1
Brazil 33.00% 19.00% 9.30% 13.35 2 2 2 2 22 22 2222 Grupo 4
Chile 19.00% 6.00% 2 1 0 0 21 00 2100 Grupo 1
Colombia 16.00% 5.00% 2 1 0 0 21 00 2100 Grupo 1
Dominican Republic 0 0 0 0 00 00 0000 Grupo 1
Ecuador 12.00% 2 0 0 0 20 00 2000 Grupo 1
Guatemala 12.00% 2 0 0 0 20 00 2000 Grupo 1
Mexico 16.00% 0.10% 2 1 0 0 21 00 2100 Grupo 1
Nicaragua 15.00% 2 0 0 0 20 00 2000 Grupo 1
Paraguay 10.00% 3.00% 1 1 0 0 11 00 1100 Grupo 1
Peru 19.00% 4.00% 2 1 0 0 21 00 2100 Grupo 1
Trinidad and Tobago 15.00% 25.00% 2 2 0 0 22 00 2200 Grupo 2
Venezuela 14.00% 14.00% 2 2 0 0 22 00 2200 Grupo 2
41
VAT or
taxes
RUSSIA/CIS/CENTRAL AND EASTERN EUROPE
Albania 20.00% 0.00% 2 0 0 0 20 00 2000 Grupo 1
Azerbaijan 18.00% 15.00% 2 2 0 0 22 00 2200 Grupo 2
Georgia 18.00% 12.00% 2 2 0 0 22 00 2200 Grupo 2
Kazakhstan 15.00% 0.00% 2 0 0 0 20 00 2000 Grupo 1
Russia 18.00% 5.00% 2 1 0 0 21 00 2100 Grupo 1
Ukraine 20.00% 2 0 0 0 20 00 2000 Grupo 1
Uzbekistan 20.00% 0.20% 2 1 0 0 21 00 2100 Grupo 1
WESTERN EUROPE
Austria 20.00% 2 0 0 0 20 00 2000 Grupo 1
Bulgaria 20.00% 2 0 0 0 20 00 2000 Grupo 1
Cyprus 15.00% 2 0 0 0 20 00 2000 Grupo 1
Czech Republic 19.00% 2 0 0 0 20 00 2000 Grupo 1
Denmark 25.00% 2 0 0 0 20 00 2000 Grupo 1
Estonia 18.00% 2 0 0 0 20 00 2000 Grupo 1
France 19.60% 2 0 0 0 20 00 2000 Grupo 1
Finland 22.00% 2 0 0 0 20 00 2000 Grupo 1
Germany 16.00% 2 0 0 0 20 00 2000 Grupo 1
Greece 19.00% 2 0 0 0 20 00 2000 Grupo 1
Hungary 20.00% 2 0 0 0 20 00 2000 Grupo 1
Ireland 21.00% 2 0 0 0 20 00 2000 Grupo 1
Italy 20.00% 2 0 0 0 20 00 2000 Grupo 1
Latvia 18.00% 2 0 0 0 20 00 2000 Grupo 1
Lithuania 18.00% 2 0 0 0 20 00 2000 Grupo 1
Luxembourg 15.00% 2 0 0 0 20 00 2000 Grupo 1
Malta 18.00% 2 0 0 0 20 00 2000 Grupo 1
Netherlands 19.00% 2 0 0 0 20 00 2000 Grupo 1
Poland 22.00% 2 0 0 0 20 00 2000 Grupo 1
Portugal 21.00% 2 0 0 0 20 00 2000 Grupo 1
Romania 19.00% 2 0 0 0 20 00 2000 Grupo 1
Slovakia 19.00% 2 0 0 0 20 00 2000 Grupo 1
Slovenia 20.00% 2 0 0 0 20 00 2000 Grupo 1
Spain 16.00% 2 0 0 0 20 00 2000 Grupo 1
Sweden 25.00% 2 0 0 0 20 00 2000 Grupo 1
UK 17.50% 2 0 0 0 20 00 2000 Grupo 1
42
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Figure C.9. Bangladesh Mobile Industry Structure Figure C.10. Bangladesh Wireless Penetration
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Figure 2. Variables utilized to measure broadband impact on economic growth
Type of variable Data set Source Rationale

Economic growth GDP (2004-8) World Bank Dependent variable
Control for level of GDP per capita World Bank Measure for starting point of
development (2000) growth
Control for )NVESTMENT'$0 World Bank Measure for differences in
Investment 8) investment levels
Control for Human Tertiary education Unesco, Earthtrends, University Measure for differences in
Capital (2002) of West Indies, Euromonitor, human capital
Government of the
Commonwealth of Dominica
Broadband penetration Broadband penetration growth ITU Independent variable
growth (2003-4)
19
We have broadband penetration data for the majority of Latin American and Caribbean countries after 2003 (19 countries included in the sample).
51
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Figure 3. Broadband impact on economic growth in Latin America
GDP growth Coefficient Standard error T-statistic P>[t] 95% Conf.

interval
GDP per capita 2000 -.0006045 .0002142 -2.82 0.011 -.0010528
)NVESTMENT'$0 -.0006496 .108927 -0.01 0.995 -.2286365
Tertiary education level .1900042 .0670932 2.83 0.011 .0495766
Broadband penetration .0177989 .0061606 2.89 0.009 .0049046
Constant 7.989611 4.063328 1.97 0.064 -.5150321
Number of 24
observations
F(4,14) 14.34
Prob>F 0.0000
R2 0.4311
Root MSE 4.7802
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ATG 66.2797 8.9403
ARG 7702.89 20.6923 16.5867 61.1355 107.823
ABW 20502.1 28.2821 387.313
BHS 16506.7 29.3046 4.3506 24 15.5457
BRB 10168 20.1008 5.5318 37.2433 8.1841
BLZ 3329.86 18.6054 5.521 1.93629 194.065
BOL 1009.76 13.5399 14.8069 38.2594 49.0383
BRA 3701.47 16.7093 18.9152 20.1332 222.64
CYM 18.8224
CHL 4880.05 21.0708 12.0877 41.0088 34.5049
COL 2364.27 23.1895 19.9581 24.0214 94.2288
CRI 4058.86 20.4167 9.9618 18.9653 84.3765
CUB 27.8023
DMA 3802.05 27.4794 5.0248 10.72 22.9353
DOM 2744.36 17.1358 16.2107 34.0052 144.656
ECU 1295.48 21.5539 11.6646 26 66.1192
SLV 2209.16 16.5201 9.8179 17.4876 49.0833
GRD 4078.75 50.4495 8.4024 4.5791246
GTM 1717.86 19.3484 10.2256 9.51231
GUY 942.36 24.7934 8.0225 6.51219
HTI 448.932 28.3518 13.1886 1
HND 1146.87 27.2208 9.8352 17.259
JAM 3479.06 10.1887 19.1449 197.798
MEX 5934.98 20.3829 7.4992 21.7426 144.245
ANT 21.242
NIC 770.589 27.4293 7.3006 17.8016 12.1392
PAN 3939.22 18.8851 10.2418 42.6653 9.3827
PRY 1322.65 18.666 18.1138 25.9625 498.308
PER 2049.3 20.1453 12.8428 31.9533 139.23
PRI 16003.7 58.0852
KNA 7441.03 44.0985 6.5369 2.1776316 117.188
LCA 4224.21 25.2008 5.4352 12.8799 168.86
VCT 3102.43 32.4618 7.6686 5.665548 14.9604
SUR 1909.75 23.4107 21.8914 12.4278 91.9079
TTO 6269.92 16.7421 14.3111 8.36397 377.199
URY 6914.36 16.2452 19.4821 35
VEN 4818.71 19.8794 23.2786 37.8436 76.5741
53
E. Economic impact model assumptions
Mexico Malaysia Brazil Bangladesh South Africa

GDP (2009) (billion) 1,143 212 1,623 82 276
Estimated GDP growth (2010-2014) 3.5% 3.8% 4.5% 7.2% 3.5%
Population (2009) 110.6 27.5 192.3 159.2 49.3
Population growth (2010-2014) 1.0% 1.9% 1.2% 2.0% 1.0%
Handset price (2009) 155 165 251 172 171
Cost of services (annual, 2009) 285 229 471 198 249
TCO (2009, including taxes) 347 295 571 267 301
Taxes on TCO 16.0% 6.1% 43.3% 54.8% 14.9%
Mobile broadband penetration (2009) 2.9% 13.1% 3.1% 0% 8.0%
Mobile broadband penetration (2014) 10.0% 30.4% 12.0% 4.1% (see note) 22.4%
(base case)
Mobile broadband users (2009, millions) 3.2 3.6 5.9 0 4.0
Mobile broadband users (2014, millions) 11.6 9.2 24.8 7.1 (see note) 11.6
(base case)
Estimated average growth of mobile 29.5% 20.6% 33.3% * 23.4%
broadband (2009-2014)
Notes:
1. There is no fixed date for the launch of 3G services in Bangladesh. The model estimates the impact in Bangladesh assuming a 5 year period
after services are first offered, basing the calculations on the macroeconomic numbers of the period 2009-2014. The longer the launch is
delayed, the higher the impact will be, as most likely GDP will be higher on year 0 and prices will be lower than the ones assumed in this
exercise. To avoid additional assumptions, the decrease in handset price was assumed to be similar than in the rest of the countries studied.
Conservatively, it was assumed that the cost of service did not decrease in the 5 year period, though its initial level was only 50% of the lowest
cost of service assumed for other countries, reflecting current average prices (in nominal terms, as opposed to estimating PPP).
2. GDP is expressed in nominal USD billion. Price of handset, cost of service and TCO in is USD calculated at 2009 average exchange rates.
3. Prices of handsets were assumed to decrease 5.9% per year in all cases.
4. The cost of service was assumed to decrease each year by 4.3%, 8.9%, 9.7%, 0%, and 7.3% in Mexico, Malaysia, Brazil, Bangladesh (see
Note 1), and South Africa respectively.
5. “TCO” (Total cost of ownership) is the sum of the cost of the annual service plus the amortization of the handset cost over a certain period. It
was assumed it was amortized on average over a 26.8 month period in all cases (30 months in 2009). TCO includes taxes levied on services
and handsets.
6. “Taxes on TCO” is the average taxes paid on services and on the amortization of the handset. For Brazil, which charges taxes on overall
revenue, the “Taxes on TCO” was calculated in such a way as to make this percentage comparable to the rest of the case studies. In Brazil,
certain other levies (FUST, FUNDTEL, and others) were not considered.
7. Mobile broadband penetration (2014) (base case) is the forecast assuming no changes in taxation. The estimation was based on existing
forecasts (Telegeography, Wireless Intelligence, Pyramid, government reports, others) and were adjusted with adoption trends for fixed
broadband and basic wireless penetrations observed in those countries in the past.
8. Monthly churn was assumed to be 3% in all cases. It was assumed that one third of these cases implied a handset replacement.
54
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Base case 1 p.p. of additional 10 p.p. of additional

penetration in 2014 penetration in 2014
Penetration (2009) 8.0% 8.0% 8.0%
Penetration (2014) 22.4% 23.4% 32.4%
Users (2009) 4.0 4.0 4.0
Users (2014) 11.6 12.1 16.8
Most conservative scenario (penetration elasticity: 0.6, GDP elasticity: 0.17)
Additional GDP 138 139 148
Additional tax revenue (37) (39) (53)
Accumulated return 1.87 1.84 1.60
Additional users 0.307 0.320 0.443
Additional penetration (p.p.) 0.591 0.617 0.855
Most aggressive scenario (penetration elasticity: 1.2; GDP elasticity: 1.38)
Additional GDP 1,342 1,387 1,787
Additional tax revenue 303 314 409
Accumulated return 24.9 25.2 27.1
Additional users 0.620 0.646 0.895
Additional penetration (p.p.) 1.195 1.247 1.727
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Tel: +44 (0)207 356 0600
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Email: mbb@gsm.org
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The Impact of Taxation on the Development of the

Mobile Broadband Sector

Increase in Wireless Penetration Resulting Increase in Wireless User Base Resulting

25.0 24.0 250.0

Note: Malaysia is considered to be the benchmark at 6.1%

1. Background And Study Objectives 9

2. A Typology Of Mobile Taxation 11

3. Cross-Sectional Analysis Of Taxation Impact On Mobile Broadband 16

4. Case Studies On Mobile Broadband Taxation 19

5. Quantitative Assessment Of Impact Of Taxation On Mobile Broadband And The Economy 23

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Figure A. Mobile Service Taxation Approaches

Sector discrimination China

Sector discrimination Yemen

Handset tax revenue Brazil Bangladesh

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38% 38% Bangladesh

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upgrade penetration telecom revenues

 Elasticity (price,  ATR is spent/invested by  Required

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1. Background And Study Objectives

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Figure 1: Study approach

Prior reports to Desk GSMA Desk Broadband

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2. A Typology Of Mobile Taxation

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Figure 2. Service Taxation Approaches

Telecom-Specific Fixed taxes

None Low High None Low High

Brazil Argentina Bangladesh

Figure 3. Service Taxation Approaches by Country

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Figure 4. Handset Taxation Approaches

Customs Duty Telecom-specific

None Low High None Low High

VAT Low Fixed Low

Mexico Argentina Bangladesh Brazil

Figure 5. Handset Taxation Approaches by Country

Continent Sector discrimination Sector discrimination Sector discrimination Handset revenue

Figure 6. Combined taxation approaches

Sector discrimination China

Sector discrimination Yemen

Handset tax revenue Brazil Bangladesh

Figure 7. Combined Taxation Approach by Country

Continent Universalization and Protectionism Sector distortion Tax maximization and

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3. Cross-Sectional Analysis Of Taxation Impact On Mobile Broadband

38% Continent/Country Population

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