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Sun 11 Jan 2009 02:56 PM

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Operators' concern over Jordan telecom tax

Leading operators and analysts claim tax will hinder development of telecoms sector

Mobile operators in Jordan have criticised a proposal to tax mobile phone use as being ill-planned and potentially damaging to the sector, after the lower house of the country’s parliament, the house of deputies, endorsed a decision to impose a 1-fils tax per minute on mobile phone calls, with the revenues earmarked to help the country’s livestock industry.But operators and industry analysts said that the planned tax of D0.01 ($0.014) per minute on wireless calls would cause headaches for cash-strapped mobile users and mobile operators already hit by numerous taxes.

Philippe Vogeleer, chief strategy officer at Jordan Telecom Group said the government had come to view the mobile sector as a “cash cow”, and added that the proposed tax would stifle the ability of operators to offer customers different types of services and payment methods, such as all-you-can-talk deals, and combined fixed and mobile bills.

“It makes a number of things very complicated, because let’s say you want to make a package between fixed and mobile, you will have a different tax applicable to the fixed traffic and mobile. As such, the complexity of the tax prevents simple marketing approaches from happening,” Vogeleer told CommsMEA.

“We are trying to do everything we can to simplify things and this type of initiative is not helping. It is also confusing for consumers not knowing exactly how much they are paying.”

Jawad Abbassi, general manager of Arab Advisors Group, a Jordan-based consultancy focused on the ICT sector, said the tax could amount to a 10% surcharge on the call rate for some packages in Jordan, or a 10% cut to the revenues for the operator.

He added that the government should raise revenues from general taxation, rather than targeted taxes. “The operators in Jordan are basically saying this does not make sense, and I agree with them because this is a targeted tax. In my opinion the worst kind of tax is a targeted tax. The proper system of taxation should be that the government collects taxes through proper channels such as income tax and sales taxes.”

But Abbassi is hopeful that the tax may fail to be endorsed by the Jordanian parliament’s upper house, where the proposal will come under greater scrutiny from more seasoned business people. “It will probably be repealed in the Senate. If they disagree, it goes back to the parliament, to the house of deputies. If the house of deputies still persists, they have a joint session and then they make a decision by majority vote in the joint session,” he said.

However, if the bill is passed, it will add further to the tax burden on Jordan’s telecoms sector. At present, taxes account for 20.5% of subscribers’ bills, in addition to an annual JD1 university tax per line, Zain’s general manager Ahmad Al Shatti told The Jordan Times. In addition to a 16% sales tax and 4.5% special tax, some 10% of local operator’s revenues go to the treasury, according to Al Shatti. He added that 25% of their total profits to the treasury.

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