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Belarus Mobile Users, April 01, 2010

Mobile Users Condemn New Tax

Author: By Anna Osokina in Minsk (BRS No. 45, 17-Dec-03)

17/12/2003

Plan to boost government coffers by imposing VAT on mobile telephones widely criticised.

A tax on mobile phones in Belarus is expected to be introduced, despite the concerns of users, the communications ministry and the industry itself.

The idea is so unpopular that Vassily Khrol, the deputy who proposed it, has had to ask the KGB for help to shut down a web site which displayed his home phone number, after dozens of outraged mobile phone users showered him with angry calls.

Khrol, who chairs the parliamentary housing, construction, trade and privatisation commission, recently suggested that the government introduce an 18 per cent value added tax, VAT, for mobile phone services in 2004.

While individual mobile phone users are currently exempt from VAT under Belarusian laws, corporate users are not. Khrol argued that by imposing the same tax on both, the government would collect an extra 60 million US dollars a year.

"We need to find ways to supplement the national budget," Khrol told IWPR.

"We are not trying to take anything away from citizens - the idea is to set our tax breaks straight," he said, adding that mobile phone users were not exactly "the poorest people" in Belarus, and should therefore be taxed more.

Belarusian president Alexander Lukashenko has already asked parliament and government to study the proposal - which means that it is very likely to be implemented.

There are around a million mobile phone users in Belarus, paying an average of 23 dollars a month for the service. "Based on this figure, every user will be paying five dollars a month in VAT on their mobile phone bills," Khrol said.

However, many users are students or other people with limited incomes, who would struggle to afford the rise in cost the VAT rule would create.

Following the VAT proposal, internet users have been flooding online forums with their concerns.

Some even hit back at Khrol himself by posting his home, office and mobile telephone numbers on the internet - with the result that the hapless deputy was been plagued by dozens of crank calls a day.

"My life has become hell," Khrol complained to his fellow deputies on December 10. "I received 18 [calls and SMS messages] so far today, and more than 40 yesterday."

But those angry phone users are not the only ones opposed to the idea, the communications ministry has also shown little enthusiasm.

One official, speaking on condition of anonymity, told IWPR, "The measure runs against the grain of the ministry's policy, which is to promote affordable mobile telephone services nationwide. Such a move would reverse the downward trend in tariffs."

More than half of those who would be affected are young people, he explained. "Parents buy their children phones to stay in touch with them," he said, adding he would not rule out more widespread anger among users and a drop in the number of new phone connections.

The mobile phone industry too is unhappy with the proposal. Sergei Poblaguev, manager of the Delovaya Set joint venture, described the initiative as a no-win situation.

"People will lose out and the government will gain nothing, while the economic performance of mobile service operators will deteriorate," he said. " There will be fewer users and new connections, while existing subscribers will start using their service more economically. Therefore, providers will be paying less tax to the government."

Finance Minister Nikolai Korbut expressed the hope that the service operators would not make their subscribers shoulder the extra expense, but admitted the cost would undoubtedly "go up a little". However, he believes the eventual revenue would be far less than Khrol's estimate of 60 million dollars.

The move to impose VAT on mobiles is something of a turnaround for Khrol, who - while head of the Incentive for Economic Growth parliamentary faction - had previously always lobbied for alleviating the tax burden on all industries as a growth incentive.

But in his present role, he is keen to raise extra tax revenues to finance construction and housing renovation projects.

Two of these high-priority projects - the Belarus National Library and the new television broadcasting tower - have suffered cash shortages which the authorities have promised to address.

In a recent interview with the Belorusskaya Gazeta newspaper, Khrol said, "My idea is for the government to use all these surplus VAT revenues to pay for housing renovation: Balconies are falling down, roofs are leaking, pipes are broken, but little [is done to] improve this situation."

Anna Osokina is a pseudonym of a reporter in Minsk.

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Mobile Users Condemn New Tax

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