GSMA Calls On Turkey's Government To Lower Its Taxation On Mobile So All Stakeholders Can Benefit

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ISTANBUL, May 9, 2012 /PRNewswire/ -- The GSMA today outlined findings from its Mobile Telephony and Taxation in Turkey report which was undertaken by Deloitte to examine the economic impact of mobile telephony and the impact of mobile-specific taxation in Turkey. The research highlights that mobile consumers in Turkey pay the highest taxation as a proportion of mobile service costs in the world. Taxes in 2011 represented 48.2 per cent of the Total Cost of Mobile Ownership (TCMO)(1) for the average Turkish consumer against a global average of just 18.2 per cent. As a result, mobile penetration in Turkey lags behind other European and neighbouring countries.  An analysis of countries that had a lower penetration than Turkey in 2000 shows that penetration in all of these countries has outpaced Turkey by 2011.

"Taxation on mobile consumers in Turkey should be eased," said Gabriel Solomon, Head of Regulatory Policy, GSMA. "Lowering taxes will be good for consumers, good for the government and good for the industry. We call on the Turkish government to review their tax strategy with a view to adopting a more positive approach. In the current economic climate, it is paramount for governments to foster, not hinder, economic growth."

Importantly, the report indicates that lowering taxes can actually increase revenue for the government in the medium term. Modelling the impact of reducing a combination of taxes to 38 per cent of the TCMO in 2012, the report shows that the government would recoup more tax revenues in 2015 and thereafter, as the mobile market grows and the deployment of mobile broadband expands. The report also provides an analysis of the impact of mobile telephony on Turkish citizens and the economy. In 2011, the mobile industry contributed TRY 28.8 billion to the Turkish economy, approximately 2.3 per cent of GDP, and accounted for nearly 150,000 jobs.

Taxes on mobile consumers include:

1. A 25 per cent Special Communications Tax (SCT) on usage that is paid directly by mobile users and is applied on call minutes and messages on top of VAT. For example, for every TRY100 of net airtime and SMS usage purchased by customers, a tax of TRY 43 (VAT plus SCT) is paid by local consumers and businesses as tax in addition to the net price;
2. Handsets are subject to heavy taxation in Turkey. A Special Consumption Tax of 25 per cent is levied on the Cost, Insurance and Freight (c.i.f.) price for each handset imported. In addition to the Special Consumption Tax, handset prices are also subject to a 6 per cent tax that benefits the Turkish Radio Television Foundation;
3. An Initial Subscription Charge (TRY 34 in 2011) applies. This is an additional fixed component of the Special Communications Tax and consists of a fixed amount to be paid once by consumers when a new SIM card is purchased. It is adjusted every year according to inflation and has been set at TRY 37 for 2012;
4. A Wireless Licence Fee (TRY 13.2 in 2011) is also paid by consumers when a new connection is purchased. This can be thought of as a registration fee and is paid regardless of whether the connection is used for voice services or mobile broadband. It is adjusted every year according to inflation and has been set at TRY 14.56 for 2012;
5. An annual Wireless Usage Fee (TRY 13.2 in 2011) applies as a rental fee that users pay annually for their active subscriptions and has been set at TRY 14.56 for 2012;
6. In addition to standard corporate and other spectrum and numbering fees paid to the government and regulator, mobile network operators (MNOs) in Turkey are subject to a mobile-specific licence fee calculated as 15 per cent of their turnover. However, fixed telecom operators are not subject to the Treasury Share fee as a similar fee applying to them was removed in 2004 prior to the fixed operator's privatisation; and
7. MNOs are also subject to a 'Telecommunications Regulation Authority Share' paid as a contribution to the expenses of the regulatory authority, calculated as the 0.35 per cent of the operator's net sales per annum.

"The complex licence and taxation structure that applies to mobile operators is affecting their ability to serve their customers' needs, with impacts on penetration levels and the ability of Turkey's consumers to enjoy the benefits of wireless communications and wireless internet," said Chris Williams, partner at Deloitte TMT Economic Consulting team.

Note to Editors:
The report summarises the detailed analysis contained in a series of annexes and is based on discussions and data provided by Turkcell and Vodafone, and on discussions undertaken with Avea and other stakeholders.  Additional data has been provided by the GSMA and taken from publicly available sources that are referenced in the report or annexes. The report can be found at www.gsma.com/tax.

Turkey has a well-established mobile market characterised by three MNOs, Turkcell, Vodafone and Avea, with respective market shares of approximately 52.8 per cent, 27.6 per cent and 19.6 per cent in 2011.

The number of total mobile subscribers in Turkey was more than 65 million in Q4 2011, representing a mobile penetration of 88.5 per cent; mobile penetration in Turkey increased until 2008 90.63 per cent, and since it has slightly fallen. Notably, penetration has failed to reach the 100 per cent milestone that is common in other European countries.

GSM networks cover 99 per cent of the population.  Mobile telephony also provides wireless data and broadband to 38.2 per cent of the total mobile customers, with 3G services launched in 2009 and the expectation from the MNOs that LTE trials will be rolled out by the end of this year.

(1)The TCMO is derived from handset costs, connection costs, rental costs (typically for post-pay services) and call and SMS usage costs. Handset and connection costs in Turkey are amortised over a three year period.

About the GSMA
The GSMA represents the interests of mobile operators worldwide. Spanning more than 220 countries, the GSMA unites nearly 800 of the world's mobile operators, as well as more than 200 companies in the broader mobile ecosystem, including handset makers, software companies, equipment providers, Internet companies, and media and entertainment organisations. The GSMA also produces industry-leading events such as the Mobile World Congress and Mobile Asia Congress. 

For more information, please visit Mobile World Live, the online portal for the mobile communications industry, at www.mobileworldlive.com or the GSMA corporate website at www.gsma.com.  

SOURCE GSMA