Wed | Jan 16, 2019

Barbados to raise millions from tax on cell phone use

Published:Friday | December 18, 2015 | 12:00 AM

The Barbados government has introduced legislation amending the value added tax (VAT) to allow for a 22 per cent tax on voice and other transmissions from cell phones.

Finance Minister Chris Sinckler told legislators on Tuesday night that the tax, which goes into effect from January 1 next year, will raise BDS$14 million annually that would go towards funding university scholarships.

Sinckler said the proposed changes are meant to "increase the efficiency of tax administration, provide for the imposition of value added tax on certain mobile services, and enhance the enforcement provisions in the act and for related matters".

He said contrary to popular belief, the imposition would not only affect cell phone calls, but all mobile transmitting services and that following his initial announcement in June of his intentions to introduce a tax on cell phone services, "there was some discourse ... largely driven by the media in Barbados, that we were just only applying the tax when people make calls in the use of their cellular phones".

But Sinckler told legislators that that is one form of mobile airtime.

"In the definitions that were provided, mobile airtime was taken to mean all services conducted across the bandwidth on the usage of a cellular phone," the finance minister said.

He said the range of services to be covered by the new levy included use of the Internet and other transmissions that facilitate email, WhatsApp, Skype and much more.

Sinckler said the resulting revenue raised would go towards a soon-to-be announced university scholarship fund, replacing the bursary awards introduced last year as a measure to support students facing challenges owing to government's withdrawal of fee support two years ago.

"We always knew that the bursary system was a temporary one at best, and that we would have to find a permanent replacement for that by identifying ... resources to assist in those circumstances."

Sinckler explained that despite the recognised need to fund education, government was cautious in approaching taxation on mobile services.

"We did it from the perspective not that we want to find additional taxes ... but we examined the objectives. What is it that you would want to do this for? Can this area of business sustain that imposition, and what would be the outcomes of such an initiative?"

He noted the versatility of the smartphone that enables business and encourages continued capital investment that is good for Barbados.

"Government has to be very mindful of not acting in a manner as to put a brake on the productive advance of cell phone and mobile technology in our economy because it is such an important part of doing business, making business more efficient and accessible."

Sinckler said "all of these things were in the back of the minds of the administrators and policymakers, certainly in my mind, when we were thinking about the imposition of this particular tax."