4 Considerations When Taxing Caribbean Telecom Companies

Increasingly, Caribbean countries are taxing telecoms and ICT.

Across the Caribbean, many countries have implemented some kind of tax specific to telecoms. The latest countries where it has been proposed are Barbados and Antigua and Barbuda. In most instances, the tax is levied on a specific service, such as mobile/cellular calls, either where none previously existed, or at a higher rate than what might be the norm, such as that established as Value Added Tax (VAT), or General Consumption Tax (GCT).

However, while increasingly Caribbean governments are levying taxes on telecoms services, other countries, such as the United States of America (US) are planning to eliminate those that have been implemented.  Yesterday, 11 February, the US Congress passed the Permanent Internet Tax Freedom Act (PITFA), which would prohibit states or localities from taxing Internet access, along with banning multiple or discriminatory taxes on electronic commerce (Source: US Congress).

In both the US and Caribbean scenarios there are benefits and challenges, depending on which side of the fence you sit. Below are four things to think about when telecoms (and/or ICT) services are being taxed, or taxes are being proposed.

1.  Telecoms recognised as a critical driver of economic growth and job creation

Most countries, including those in the Caribbean, have acknowledged the importance of telecoms and ICT as drivers for economic growth and job creation.  It is even part of the reason why the US is seeking to pass the PITFA.

Unlike what obtained in the past, where the public service and government-owned firms were key job creators, absorbing hundreds or even thousands of individuals, most countries have had to streamline their the size of their public sector, and rely to a considerable extent on the private sector to drive growth and create jobs. In this new dispensation, the government’s role is to create the enabling environment for the private sector to foster that growth, and telecoms and ICT are critical components in the ecosystem.