Making the connection.

The article mentions a study released by the GSM Association which reports developing countries' taxes on mobile phones. Most countries charge value-added tax on handsets. Many also impose customs duties on imported phones. Subscribers may face further taxes when they sign up, as well as VAT on calls and, sometimes, additional telecoms-specific taxes too. Hardly surprisingly, developing countries with high mobile taxes generally have far fewer mobile phones per person than those with low taxes. Cutting taxes can boost adoption: India has reduced its handset import duties over the past three years, helping to boost penetration from less than 1% to more than 5%. Raising taxes can slow adoption: monthly subscriber growth in Bangladesh fell from 11% to 7% after the introduction of a $14 connection tax in June. Of course, governments have to tax something, and mobile phones are convenient. The job of collecting taxes can be passed on to network operators, who already have to keep track of their customers' usage in order to charge them properly. But the cost of the taxes, in social, economic and developmental benefits forgone, is high. Most governments say they want to extend access to communications and close the "digital divide". Special mobile-phone taxes have exactly the opposite effect. The study models the effects of various changes in tax policy. Scrapping all import duties and sales taxes on low-cost handsets, for example, could prompt 930m additional sales by 2010. Although this would dent tax revenues in the short term, these new subscribers would pay an extra $25 billion to $45 billion in usage taxes over the same period. Less drastically, every reduction of one percentage point in sales taxes on mobile services would result in a 2% increase in mobile penetration between 2006 and 2010 in a typical developing country, the study predicts.