Tuesday, June 02, 2009

Some thoughts on tax and mobile payments

I remember reading somewhere that a new fashion of clean-shaven faces emerged in Russia after one of the Tzar's started taxing beards. It is true that, while taxes are an important source of income to governments, it also impact behaviour. A number of taxation issues are relevant when considering the economic impact of mobile payments:
  • Mobile payments and specifically wallets may lead to income becoming more visible and thus easier to tax. This may deter unbanked people to open wallets. It is important to consider minimum tax-brackets and mechanisms to make this visible and transparent, so that visible income should not attract tax that was not normally paid.
  • Value added tax payments are a whole topic of discussion on its own. Whereas payment for goods at a merchant is a clear indication of a purchase and should therefor attract VAT (where applicable), this becomes grey for person to person (P2P) payments. The collection of and the the definition of VAT may have to be re-thought as P2P payments become prevalent.
  • Taxing of electronic payments (which is quite common in many countries), adds to the cost of mobile payments. This is surely an unnecessary tax on technology that could contribute directly to economic growth
In summary, governments should consider not taxing mobile payments transactions.

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