By Chandeepa Wettasinghe
Sri Lanka’s Finance Minister last week said that increased taxation on Internet services was requested by the telecommunication service providers (telcos) to increase their revenue and that the increased taxes would not have any effect on demand for data.
“Telcos told us that a lot of people are moving from voice to data through Whatsapp, Viber and that their revenues are going down. So, we had to create a level playing field as practiced in other countries. The government will get increased revenue through this and so will they (telcos),” Finance Minister Ravi Karunanayake said.
However, instead of raising prices to gain more revenue, the telcos in the recent past have been providing more data for consumers while keeping prices the same, due to increased supply capacities and intense competition.
This October, all mobile telephony services were removed from the exemption list of the value-added tax, which is now being charged at 14 percent.
Further, the 2017 budget proposed to increase the effective tax on Internet services from 32 percent to 50 percent by charging the normal 25 percent Telecommunication Levy on Internet services. Prior to the budget changes, just a 10 percent Telecommunication Levy rate was charged on Internet services.
However, Karunanayake insisted that prior to the budget, the Internet services were being taxed at 48 percent and charging the same Telecommunication Levy rate only increased the rate to 50 percent. “There is no big change. 48 percent became 50 percent. When it was 48 percent, you didn’t say anything,” he said. He further noted that taxes on Internet services were increased in order to fund the government’s aim to provide nationwide free Wi-Fi services. “I don’t see a connection between taxing data and moving into a digital economy. People are anyway moving towards digital and to provide that service, we need revenue. The prime minister has said in his policy statements to provide a nationwide Wi-Fi service and we need to fund that,” he added. The free Wi-Fi service provides just 100 megabytes of data per user per month and the Information Communication Technology Agency (ICTA) has noted that the purpose of free Wi-Fi is to get more people to first experience the Internet and then push for induced consumption of Internet services from telcos as lifestyles change.