Regressive Tax

Sept 06, 2007 (LBO) – Sri Lanka has dropped a controversial fixed levy from mobile phones which would have hit the poorest phone users the hardest, but slapped a 7.5 percent tax on calls, telecom minister Rauf Hakeem told parliament Thursday. The government initially proposed a fixed 50 rupee charge which would have hit the poorest or ‘bottom of the pyramid’ users hardest, as well as tripling a usage based charge from 2.5 percent to 7.5 percent.

Unfair Charge

Telecom analysts pointed out that at one network where the average spend per pre-paid user was just 311 rupees, taxes would take away 110 rupees.

Hakeem told parliament that a 7.5 percent proposed charge had now been increased to 10 percent following discussion with President Mahinda Rajapaksa last night and the fixed levy had been abandoned.

“I think that the removal of the regressive tax is a great benefit for the bottom of the pyramid, but of course the government should not be taxing industries just because they do well,” says Rohan Samarjiva, a former telecom regulator who led a campaign against the levy.

“And government should not discriminate between mobile and fixed telecommunications.”

The government already charges value added tax