Title: How strong is the case for the fiscal exceptionalism of the telecommunications sector?

Authors: Martin Cave

Addresses: Imperial College Business School, Imperial College London, South Kensington Campus, London, SW7 2AZ, UK

Abstract: Telecommunications are subject to exceptional fiscal treatment in respect of both taxes and subsidies. Services are subject to special taxes in many jurisdictions; and special subsidies are paid to finance investments, especially in new fibre networks. The paper analyses the validity in general of both of these forms of treatment. In many jurisdictions the ground for collecting special taxes seems to hinge, especially in developing countries, upon the relatively low costs of tax collection. However, special taxes may discourage diffusion and restrict growth. In relation to subsidies, the justification can run from equity or industrial policy goals to the avoidance of market failure. In both instances, the argument depends on the degree to which investment in telecommunications creates externalities which enhance growth. The paper concludes that no general case for either form of special treatment has been proven.

Keywords: telecommunications industry; taxes; subsidies; effects on growth; exceptional fiscal treatment; taxation; new fibre networks; investment finance; developing countries; tax collection costs; telecommunications investment; special treatment.

DOI: 10.1504/IJMNE.2012.051887

International Journal of Management and Network Economics, 2012 Vol.2 No.4, pp.322 - 335

Published online: 30 Aug 2014 *

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