Tajik Government to Tax Lucrative Phone Businesses

The government in Tajikistan is considering changing the tax legislation to add mobile phone services to the list of items like alcohol and tobacco on which excise duties are paid.

Analysts say the move is an attempt to shore up falling government revenues. The mobile phone industry is one of the few sectors showing growth at a time when other businesses are hard hit by the effect of economic crisis.

In an interview for IWPR, Saodat Vahhobova of the finance ministry department for taxation policy and revenue forecasting said an excise tax of three per cent would be levied on all services provided by mobile phone operators.

The bill is currently being reviewed by various government ministries. If approved by them, it will go forward to parliament.

It is the second attempt to impose additional taxes on mobile operators. A similar move in 2007 failed after the phone companies lobbied against it.

There are nine mobile phone companies in Tajikistan – MLT, Babilon-M, Tcell, Beeline, М.Теko, Тelecom Inс (Skytel), ТК-Mobile, Тajiktelecom, and Telecom Technology. Most were set up with foreign investment.

Their combined annual income is put at around 320 million US dollars.

Rustam Jabborov, an independent analyst, believes the government is trying again because other revenues are in decline.

Tajikistan has been hit by the global economic crisis in several ways – demand for its export commodities, aluminium and cotton, has fallen; and the remittances sent home by hundreds of thousands of Tajik migrants working abroad have declined as jobs dry up in Russia and Kazakstan.

“Revenue targets have not been reached for the last one and a half years, and the government is therefore looking for additional sources of income. The communications sector is one of the most profitable in the country,” Jabborov said in an interview for the Asia Plus news agency.

Despite widespread poverty, Tajikistan has seen a boom in mobile phone use in recent years. There are around 4.3 million subscribers in a population of 7.5 million people. Competition among provider firms has slashed call charges, which are among the cheapest in Central Asia.

Concerns are now being voiced that the new tax on phone services will hit the average consumer by forcing companies to raise their prices.

Behzod Faizulloev, director of Babilon-M, told IWPR a three per cent tax would mean at least a five per cent increase in phone charges for the consumer, and would also slow the development of the industry.

He says the phone companies are already contributing a lot of money to the government’s coffers.

“Suffice it to say that just one company, Tcell, pays more taxes than all the banks in Tajikistan,” he said.

Economist Kakhor Aminov warned that the tax “will ultimately affect a population of which around 60 per cent live below the poverty line”.

Firuz Saidov, a researcher at the Centre for Strategic Studies said the net result of the new tax could be exactly the opposite of what the government intended.

“Price increases on these services will lead to a fall in the number of customers, which will result in reduced tax revenues from the mobile phone companies,” he said.

The deputy minister for transport and communications, with special responsibility for the mobile phone industry, Beg Zukhurov, told IWPR he was unable to comment on the bill as it was yet to be approved.

“I will comment when the final decision is taken,” Zukhurov said.

The head of the Association of Mobile Phone Operators, Ghofur Irkaev, complained that the application of excise taxes would effectively categorise mobile phones alongside items with a harmful effect on society and the environment. He said that in other countries, such items typically included petrol and other environmentally unfriendly fuels, as well as alcohol and tobacco.

Earlier this year, the authorities began suggesting that mobile phones could be harmful if used to excess.

At the end of April, President Imomali Rahmon said mobile phones were a health risk and their overuse should be discouraged, and instructed the health ministry to inform the public, especially younger people, about the health risks.

A week earlier, Rahmon had spoken of another drawback of mobile phone use – the cost. He said there were over a million phone owners in Tajikistan, each spending between 11 to 135 dollars a month on calls. That, he said, was “a drain on the financial resources of every Tajik family”.

The president’s comments sparked a series of programmes on state television highlighting the physical effects of using mobiles too much. The municipal authorities in the capital Dushanbe and other towns then started restricting billboard advertising by mobile companies, although this was later reversed.

Jahongir Boboev is the pseudonym of a journalist in Tajikistan.

This article was produced jointly under two IWPR projects: Building Central Asian Human Rights Protection & Education Through the Media, funded by the European Commission; and the Human Rights Reporting, Confidence Building and Conflict Information Programme, funded by the Foreign Ministry of Norway.

The contents of this article are the sole responsibility of IWPR and can in no way be taken to reflect the views of either the European Union or the Foreign Ministry of Norway.