Usage of mobile communications is a powerful economic growth engine, which governments can fuel by lowering taxes on mobile services and handsets, according to a new study undertaken by Deloitte for the GSM Association.

The report suggests that in a developing country, an increase of 10 percentage points in mobile penetration will lift that country’s annual economic growth rate by 1.2 percentage points. That represents a major uplift - if the proportion of people with a mobile phone in an economy, growing at 4% a year, rises from 10% to 20% the economic growth rate could be boosted to 5.2% a year.

Despite the evident economic and social benefits of mobile communications, 16 of the 101 countries analysed in the study levy telecom specific taxes on top of standard sales and import taxes on mobile phone users, according to the GSM Association, the global trade association for mobile operators. In East African countries, for example, taxes generally account for between 25% and 30% of the total cost of owning a mobile phone compared with a global average of 17.4%.

Tom Phillips, the Chief Government and Regulatory Affairs Officer of the GSM Association, said: “This study adds to the growing weight of evidence that growth in mobile services is a fundamental requirement for economic growth delivering swift and efficient communications. Governments should recognise this and adjust their tax policies to encourage mobile usage.” 

The report suggests that by removing mobile specific taxes more consumers will connect, boosting economic growth, at a very limited cost to total government tax receipts. In some cases long-term government tax receipts may even be positive.

"The impact that mobile phones have on the developing world is as revolutionary as roads, railways and ports, increasing social cohesion and releasing the entrepreneurial spirit that stimulates trade and creates jobs," added Professor Leonard Waverman, of London Business School and one of the first experts to quantify the link between mobile penetration and economic development.*

“We believe that any taxation policy should be designed in a way that does not add any further barriers to access and add to the cost of service provision for the poor,” said Mohsen A. Khalil, Director of Global Information and Communication Technologies, World Bank. “The indirect benefits to the economy of having affordable access to telecommunications services far outweigh any short-term benefit to the budget.”

Dennis Knowles, Deloitte partner, commented: "We would urge Governments and mobile operators to work together to determine the economic impact of the sector, the ideal tax mix and how these combine to meet the objectives of their country."