PhD Defence: Fayçal Sawadogo

Telecommunications Services In Developing Countries: Tax, Trade, And Mobile Money

Jury

Rota-Graziosi Grégoire, Professor, Université Clermont Auvergne
Aker Jenny, Professor, Tufts University
Tritah Ahmed, Professor, Université de Poitiers
Arezki Rabah, Research Director, CNRS- Université Clermont Auvergne
Dequiedt Vianney, Professor, Université Clermont Auvergne
Mansour Mario, Division Chief, International Monetary Fund
Rossotto Carlo Maria, Principal Investment Officer, International Finance Corporation

Abstract

Telecommunications is one of the most dynamic sectors in many developing countries. Telecommunication services improve both the productivity of economies and the well-being of individuals. There are significant advantages in promoting digital inclusion through broader mobile phone network coverage and affordable access and usage costs as well. However, since 2004, many countries have increased telecommunications’ tax burden through special taxes on mobile network operators (MNOs) or consumers. For MNOs, such policies may hurt innovation and investment in the sector and widen the digital divide between industrialized and developing countries.

The purpose of this thesis is to explore several issues raised by the development of telecommunication services in developing countries by addressing the following questions: What is the tax burden on telecommunications companies? How does the demand for telecommunication services vary with prices? How could innovations in the telecommunications sector help governments promote the diffusion of positive externalities?

Chapter 1 measures the tax burden on MNOs through the Average Effective Tax Rate (AETR) in twenty-five African countries. This tax burden encompasses general and special taxes under the Ministry of Finance's (MoF) control and fees raised by the national telecommunication Regulatory Agency (RA). For instance, the AETR varies significantly across countries, ranging from 33 percent in Ethiopia to 118 percent in Niger. Also, special taxes and fees represent a large share of the AETR, illustrating some taxation by regulation and a potential tax competition (a race to the top) between the MoF and the RA.

Chapter 2 estimates the demand price elasticity of mobile voice communication in developed and developing countries using quarterly operator data from 2000 to 2017. It finds that for developed countries, the demand is more price elastic, and voice communication is a substitute for internet data usage. Another important finding of that chapter is that, for operators in developing countries, the price elasticity decreases with the market development level as opposed to those in developed countries. Demand for mobile voice communication is thus more sensitive to price changes in the less penetrated markets in developing countries and the mature markets in developed countries. Furthermore, price elasticity has decreased over time across operators in developing countries. The results also highlight that estimated price elasticities are high, suggesting that operators do not have an obvious interest in engaging in collusive behavior that would hinder competition.

Chapter 3 studies the causal effect of mobile money (MM) services adoption on intra-African goods trade considering data from 48 African countries from 1994 to 2018. It finds that countries that adopted MM services register a higher goods trade as a share of GDP compared to non-adopters, with a higher effect on food items trade.

Chapter 4 assesses the causal effect of person-to-government (P2G) mobile payment services adoption on direct tax revenue considering data from 96 developing countries from 1994 to 2018. According to the matching estimates, countries that adopt P2G services experience a 1.2–1.3 percentage point boost in direct tax revenue as a share of GDP. P2G adoption increases revenue from corporate and personal income taxes, with a more important effect on the latter. Moreover, the average treatment on the treated is higher among lower-middle-income countries and countries characterized by limited tax compliance and corruption control and low levels of urbanization and domestic credit to the private sector.

Keywords

Taxation; Tax revenue; Telecommunications sector; Project analysis; Econometric demand model; Comparative analysis; Mobile money; P2G; Goods trade; Impact analysis; Africa; Developing countries.