Cell Phone Tax

As early as January next year, local mobile telephone customers may have to dig deeper into their pockets as the cost of international and local mobile calls is expected to be slapped with a five per cent tax. {{more}}

Prime Minister Dr. Ralph Gonsalves made the disclosure during Tuesday’s 2005 budget debate. The Prime Minister, who also has responsibility for finance, explained that the taxes yielded from the International Communications Services have taken a rapid decline in recent years.

“The yield from this tax has declined from $3.7 million in 1999 to $1.3 in 2003,” he pointed out. This cutback of some 67 per cent for Telecommunications Surcharges over four years had caused some concern to government.

Dr. Gonsalves attributed the decline in this revenue to reductions in the prices for international telecommunication services and changes in technology. “Consumers are using forms of communicating other than the traditional fixed line phone,” he said.

The Prime Minister mentioned that one of the more popular alternate forms of communication is the cellular phone. He said: “Although international calls made using cards are subjected to tax, a mechanism for assessment and collection is not fully in place and there is much loss of revenue.”

By January 1, 2005, when the International Communication Surcharge Act will be enforced, telephone calls made on cellular phones will definitely be attracting government taxes.

This has thrown a cloud of uncertainty over whether the prices of mobile services will remain the same for the over 61,000 local mobile users in the coming year. Consumers should brace themselves for some alterations in price rates in the not too distant future as mobile rates are unregulated and dependent on competition between service providers.

According to a spokesman from one mobile company, in cases where customers are now paying $10 for a card, the cost will now have to jump by some 25 to 50 cents.

Though the National Telecoms Regulatory Commission (NTRC) closely monitors charges from mobile providers, the rates, which are expected to be changed by telecommunications companies in the coming year, are not under the Price Cap Rules. These rules are implemented by “telecoms watch dog”, the St. Lucia-based Eastern Caribbean Telecommunications Authority (ECTEL), through the local NTRC.

Under the Price Cap Rules, only the rates for fixed lined calls and mobile-to-fixed line calls are regulated.

Telecommunications, Science and Technology minister, Dr. Jerrol Thompson, assured SEARCHLIGHT that the introduction of the new cellular phone tax is to narrow the scope on loopholes in which government is losing money from taxation.

“Government was able to derive revenue from international calls through fixed lines but fixed line phones have reduced… government has been losing a lot of revenue through this,” Minister Thompson said.

According to the telecoms minister, over the last five years the rate of calls has dropped from $4.50 to $1.50 for both fixed and mobile. “The cost for telephone rates has dropped over the years and will continue to go down,” the telecoms minister said, compared to St. Lucia who imposed this tax surcharge a year ago at 10 per cent; the government of St. Vincent has decided to only charge five per cent.

With the worldwide telecom revenue from $975-billion in 1996 to $1.8-trillion in 2002, mobile services will be worth $126 billion worldwide by 2008, and will account for almost 20 per cent of total mobile operator revenues.