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Telecom operators, experts pan mobile phone tax raise

Telecom operators in Jordan on Saturday called on the government to freeze its decision to increase taxes on cell phones and mobile subscriptions, expressing surprise at the move, which, they said, will harm the sector.

  Reference http://jordantimes.com/telecom-operators-experts-pan-mobile-phone-tax-raise

AMMAN — Telecom operators in Jordan on Saturday called on the government to freeze its decision to increase taxes on cell phones and mobile subscriptions, expressing surprise at the move, which, they said, will harm the sector.

The government on Thursday increased the special tax imposed on mobile phones from 8 per cent to 16 per cent, and the tax imposed on mobile subscriptions — both prepaid and post-paid — from 12 per cent to 24 per cent.

This decision was criticised by the three mobile operators in the Kingdom, economists and consumers, who launched campaigns objecting the move.

At a joint press conference on Saturday, the CEOs of Zain Jordan, Orange Jordan and Umniah said the measure will impact revenues and employment in the sector, warning that maintaining the increase will destroy the industry.

They also called on the government to revisit the decision, pointing out that the hike in the special tax has made Jordan the country with the highest telecom taxes in the region and the world.

At a press conference held last month, the three telecom operators said they paid about JD40.5 million in income tax, JD40.4 million in revenue-sharing fees and JD18.4 million in frequency fees last year.

The telecom sector contributes 14 per cent to the gross domestic product every year and employs more than 60,000 persons.

Meanwhile, economists and sector insiders also decried the decision.

Former ICT minister Marwan Juma took to Twitter to criticise the increase, which went into effect on Thursday when it was published in the Official Gazette.

“Mobile tax increase is [a] blow to citizens & industry! We hit the tipping point where usage will go down and tax collection decrease!” Juma said.

Economist Khalid Wazani also criticised the move, noting that a proper impact study should have been conducted before taking the decision. He warned that this raise on taxes will affect companies’ profits.

Referring to a previous decision to lower taxes imposed on mobile phones in order to reduce smuggling of these devices, Wazani told The Jordan Times that the increased tax “will induce smuggling”.

The economist added that the revenues the government expects to generate from this tax cannot be compared to the revenues it can generate if it improves tax collection.

Wazani noted that tax evasion in Jordan is estimated at JD800 million, while deferred tax payments are estimated at JD1.7 billion.

Raslan Deiranieh, chief financial officer of the Jordan Telecom Group, agreed with Wazani that the decision was not based on a proper study.

According to Deiranieh, if consumer behaviour remains the same, the government’s revenues from the tax on mobiles will not exceed JD75 million per year.

But he argued that users' consumption might fall because of the economic situation, noting that the government should ensure the proper collection of taxes instead of increasing taxes on mobiles.

“We were informed of the decision mid-Thursday, and it is disturbing our business,” Deiranieh told The Jordan Times.

Meanwhile, Bashar Hawamdeh, vice chairman of the ICT Association of Jordan, said that over the past few weeks, representatives of the sector held several meetings with the government and the conclusion they arrived at was the opposite of what the government announced.

He said the sector calls on the government to be transparent in its dealings with telecom companies.

Also on Saturday, the Consumer Protection Society condemned the government’s decision, noting that telecom services have become part of people's daily necessities, and increasing telecom taxes violates users’ rights.

Over the past two days users of Facebook and Twitter have called for boycotting the purchase of prepaid mobile cards for one week, while some called for turning mobiles off on Fridays.

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