Tuesday, May 29, 2012, Kingston, Jamaica: Digicel today expressed strong opposition to Minister Phillips’ proposed telecoms tax measures that were unveiled in the Government’s budget presentation last week as they will have a detrimental impact not only on the telecommunications industry, but on the wider Jamaican economy.
The benefits Jamaica has seen from the vibrant telecoms sector include inward investment, increased innovation, healthy competition, job creation, business opportunities, better standard of education and many more socioeconomic benefits - all of which contribute to economic growth.
Mark Linehan, CEO, Digicel Jamaica, stated that, “Digicel is strongly urging the Government to reconsider the imposition of these excessive taxes on the telecoms sector as these proposed tax measures will have a grossly negative impact on the economy. While these punitive taxes on the telecoms industry may assist the Government’s budget shortfall in the short term, ultimately it will be detrimental to the development of Jamaica in the medium to long run. The imposition of these taxes will severely restrict further investment in Jamaica by the operators and their ability to assist in the development of the economy, ultimately harming businesses and consumers. This Government’s proposed approach does not foster further development of the telecoms industry. The Government should rely on the enabling power of telecommunications to drive economic growth rather than attempting to slow it down.”
Digicel also says the imposition of these taxes must also be considered in the context of the existing 25% GCT rate applied to the industry, and the fact that this critical sector will continue to be taxed at the highest corporate tax rate (33.3%), which already makes telecommunications one of the most tax burdened industries in the country.
The impact of these new taxes will also be felt in terms of limiting how broadband access and internet penetration can be improved in Jamaica. This is a critical consideration given that studies have indicated that for every 10% increase in telecoms and broadband penetration there is a 1.3% boost to GDP, which directly translates into a 1.5% increase in a country’s labour productivity. Increased taxation in the telecoms sector will reduce the rate of telecoms and broadband penetration, which will hinder GDP growth and job creation.
“In the current economic climate, the Government needs to foster, not hinder, economic growth. We are calling on the Minister to conduct an urgent review of the proposed tax measures, as in their current form they will have the effect of strangling economic growth and hampering future development in Jamaica”, closed Mark Linehan.