Mobile services tax reintroduced in Croatia after a three-week respite

Mobile services tax reintroduced in Croatia after a three-week respite

Despite the 6% tax on mobile services being abolished on 1 January 2012, the new Croatian government has already announced its reintroduction.

The tax was introduced by the previous administration as a crisis measure in 2009. It is levied on telecoms operators based on the fees derived from mobile network services, including SMS, MMS and voice.

The Fee for the Provision of Services in Mobile Electronic Communications Networks Act has been adopted by the Croatian parliament and comes into force after publication in the Official Gazette.

The tax will be valid until 30 June 2013, when Croatia is expected to accede to the EU.

There was general relief from Croatian carriers when this tax was removed, but finance minister Slavko Linic indicated earlier in January that it would be reintroduced: “We are convinced the profit made by the cell companies will allow this measure.”

Research by the GSMA has been highly critical of such taxation policies, and finds that highly distorting taxation has been adopted by at least 27 countries. Its report ‘The impact of taxation on the development of the mobile broadband sector’ concluded: “Fiscal policies that apply a special tax to the telecommunications sector are inefficient and cause distortions that ‘crowd out’ private spending.”

The GSMA also identified clear inconsistencies between regulations aimed at developing the ICT sector through investment incentives and “a policy where ICT services are perceived as ‘cash cows’ upon which taxes are levied”. Its research demonstrates that for every dollar reduced in taxes, emerging countries will generate additional GDP ranging between $1.4 and $12.6.

Meanwhile, Ernst & Young reports that T-Hravatski Telekom and other carriers in Croatia are considering whether to appeal against the reintroduction of the mobile services tax in the Constitutional Court.

Gift this article