Between a rock and a hard place: Recession and telecoms taxation

Excessive taxation in the telecoms services sector is rarely found in developed economies as it hinders high technology investments, confines innovation and eventually impedes economic growth. Recession eventually complicates this process. In this paper the repercussions of multi-layer service taxation on the Greek mobile sector during the last five years are studied. It is found that public revenues, companies and subscribers would significantly benefit from a direct decrease of the special levy imposed on the use of mobile services today. An econometric model that links the consumption propensity of mobile voice service usage with the disposable income of the users and the price of the product is applied. The results of this research indicate that the adoption of high sector specific service taxes with the objective of increasing government revenues creates an economic distortion that lowers service usage, shrinks sector revenues, and, ultimately, jeopardizes the competitiveness of the mobile telecommunications sector.