Taxes on Information Technologies Threatening Economic Growth, Report Says
By GEORGI KANTCHEV
OCTOBER 27, 2014 12:01 AM
Governments around the world, particularly in emerging markets, are raising taxes on information technologies, threatening to impede economic growth and slow consumers’ adoption of smartphones and broadband Internet access, a report to be released on Monday warns.
At least 31 countries, most of which are in the developing world, are imposing the damaging high taxes on top of other sales or value-added taxes, according to the report by the Information Technology and Innovation Foundation, a nonpartisan research group in Washington.
Underscoring the report’s timeliness, thousands of Hungarians in Budapest on Sunday protested a new tax on Internet usage proposed by the government.
Robert D. Atkinson, the foundation’s president and a co-author of the report, said that levies around the world were on the rise “as nations seek to grow their own domestic I.C.T. industries and see tariffs as silver bullet.” (I.C.T. is the shorthand for information and communication technologies.)
Bangladesh tops the global ranking, adding nearly 60 percent to the basic price of information and communication technologies through taxes and tariffs, followed by Turkey (26 percent) and the Republic of Congo (24 percent).
Richer countries generally impose lower taxes — the United States adds 2.4 percent, and European nations have even lower tax levels.
The only European Union member ranked in the top 20 countries is Greece, with 9.6 percent added levies.
But Hungary’s number, now below 1 percent according to the report, could soon be higher if the government proceeds with a new tax on Internet data transfers it proposed last week.
The measure prompted backlash within and outside Hungary. Neelie Kroes, the European Union’s commissioner for digital issues, wrote on Twitter:
|Thousands of demonstrators in Hungary protested a proposed Internet tax on Sunday night.|
Credit Janos Marjai/European Pressphoto Agency
According to the foundation’s report, increasing taxes on information and communication technologies provides “a significant drag on economic growth, and the losses accrue quickly over time.”
As businesses spend less on computers and other information technologies, their productivity growth slows, the report said. Similarly, consumers purchasing fewer mobile phones and less broadband access limits e-commerce — and, in turn, slows economic growth. High levies can trim per-capita income by as much as 2.3 percentage points per year, according to the report.
“It’s one thing to tax things like cigarettes and alcohol at a higher rate because it makes sense for governments to want to limit consumption of these kinds of products,” Mr. Atkinson said. “But to do this for one of the most important technologies to drive productivity and innovation is self-defeating.”