GSMA and Euro-telcos argue for exemptions from big tech tax crackdown laws

Claim members already pay plenty, and might build fewer networks if asked to pay more

Telco lobby groups have argued that their members should be exempt from proposed global tax rules that aim to stop multinational companies – especially large technology outfits – legally but cynically avoiding tax by conducting online activities in low-tax jurisdictions.

An approach to stamping out such avoidance was approved by the G7 group of nations in June 2021, and the 38 members of the Organisation for Economic Co-operation and Development (OECD) and the G20 group have signed up to very similar proposals under the OECD/G20 Inclusive Framework on Base erosion and profit shifting.

But the GSMA – the body that sets standards for and represents the mobile telephony industry – and the European Telecommunications Network Operators' Association say the OECD plans don't consider telcos' special circumstances.

Neither organisation has a beef with the spirit of the tax-avoidance-avoidance plans, but argue that their members should get special treatment because they already pay lots of tax – including some that other entities do not.

"Over and above other infrastructure providers, the telecommunications industry pays extensive unilateral Telecommunications Service Taxes (TSTs) in many markets, in addition to corporation income taxes, VAT and spectrum license fees," the organisations' joint post states.

The groups also note that while the OECD plan would remove digital services taxes, it does not propose removing TSTs. Telcos would therefore pay double tax.

Another skein of the groups' argument is that the OECD proposals recommend exemptions for some infrastructure services businesses on grounds that, while they may operate in many nations, their profits are tied to the nations in which their infrastructure is located.

The two organisations' statement does not, however, acknowledge that payments such as spectrum fees are not taxes are such, but rather licence fees to access a natural resource. Nor does it mention that all businesses pay value-added taxes.

The two groups don't argue against all the OECD plans, but instead call for a full tax credit for TSTs and a change in definition of profits to take into account in-country capital investment in physical plant and spectrum, plus borrowing costs, credits and incentives, and accumulated losses to match infrastructure investments with returns.

That call is backed by citing data to the effect that mobile services help to grow economies, making extra taxation of carriers a self-defeating idea as it would reduce their incentive and ability to invest. ®

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