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French Version

Mobile subscribers deafened by extra tax

The governmentís decision to add a 4 percent "special tax" on cell phone subscribers is still stirring controversy among Jordanians.

The tax was imposed abruptly on all mobile subscriptions starting this month. The new tax is an addition to the already existing 13 percent sales tax, bringing the total levy to 17 percent.

The Cabinetís Commission on the Economic and Social Development made the decision late April after weeks of discussions to find a proper mechanism to levy the tax on GSM subscribers.

Sources at the Ministry of Information and Communications Technology (MICT) indicated they were not consulted on the decision. Experts believe the governmentís decision is unjustified as it would hinder efforts to expand the telecommunications sector in the long run.

With more than 1.3 million people currently using mobile phones in Jordan, sources at the Sales Tax Dept estimate the annual revenues the Treasury will make from the 4 percent tax at around JD 10 million.

The governmentís latest decision on mobiles modifies a previous one, which was taken in March charging cell phones subscribers to pay JD 1 in flat tax. Minister of Finance Michel Marto sees in the latest decision a "much easier effort for the government" to collect taxes from subscribers. "The flat tax on mobiles would have affected users of prepaid cards," he said.

The idea to impose the 4 percent special tax on mobile use was first introduced by the Telecommunications Regulatory Commission (TRC). Muna Nijem, the TRC president, noted the main objective behind the decision is to attain justice among mobile users, especially those who use the prepaid cards. She noted that the government wants to regulate the handling of mobile phones in the Kingdom. The decision was followed by the elimination of the 13 percent tax on the handsets.

Experts, meanwhile, believe the new tax will affect plans by the Kingdomís two GSM operators to expand their customer bases in Jordan.

Two thirds of mobile users hook up to Fastlink, the Kingdomís biggest and first GSM provider since 1995. Mohammed Saqr, Fastlinkís CEO, confirmed his companyís subscribers would bear the brunt of the new tax. "Recent studies show that about 8 percent of the per capita income are paid in telecom bills," Saqr pointed out. "With the new taxes, I fear more people will find it hard to maintain their connection to the mobile phones."

Saqrís regret for the governmentís decision reflects his anxiety over its effects on Fastlink. The company made JD 11.2 million in profits during the first quarter of 2003.

Experts note that efforts by mobile operators to increase their airtime revenues through stimulative usage would be hampered in view of the financial burdens the tax will bring on mobile users.

"It is certain the new tax will affect the annual profits of GSM operators in Jordan on the long run," said Mickael Ghossein, CEO at MobileCom, the Jordanís other GSM operator. "The new tax would hinder the flow of more investments into the telecom sector. It will also impede attempts by the government to establish a healthy environment for investment," he added.
Frustration is already in the air among businessmen and merchants who began to register a fallback in demand due to the new tax. "Mobile users make about 25 percent of the population. And the two GSM operators in Jordan saturate the local market," said Ismail Al Ahmad, owner of a cell-phones shop in Amman. "One can easily figure out that most subscribers use prepaid cards. The new tax will certainly force them to change their habits consequently," Al Ahmad added.

Ghassan Joha
The Star

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