Taxing telecommunications in developing countries

Thornton Matheson () and Patrick Petit ()
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Thornton Matheson: Urban Brookings Tax Policy Center
Patrick Petit: International Monetary Fund

International Tax and Public Finance, 2021, vol. 28, issue 1, No 9, 248-280

Abstract: Abstract Developing countries apply numerous sector-specific taxes to telecommunications. 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 competition likely creates rents that could efficiently be taxed. We look at how sector-specific taxes could best 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, as should tax incentives, which are generally not needed to attract foreign capital.

Keywords: Cell; Cellular; Phone; Telecommunications; Telecom; Tax; Rent; Regulation; Excise (search for similar items in EconPapers)
JEL-codes: H25 L51 L96 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s10797-020-09621-6

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