No major fallout from cell phone tax


With a 4.5 per cent rise in Value Added Tax (VAT) on cell phone use due to take effect from January 1, 2016, local provider FLOW is not expecting any decline in business.

In fact, Managing Director Niall Sheehy said yesterday the company was working diligently to meet next month’s deadline, and was preparing to hold dialogue with the Ministry of Finance to “sort out the details”.

FLOW’S Managing Director Niall Sheehy

FLOW’S Managing Director Niall Sheehy

“The direction we have from the Ministry is January 1, 2016, and that is the direction we are working towards. We just have to make sure everything is in place for that day.

“We are looking to have dialogue with the Ministry of Finance around this, but certainly there are some requirements on our end, there are technical things that need to be implemented. Unfortunately, it is not as easy as just pressing a button and changing it, so we are working to try and make the necessary changes and looking to have dialogue with the Ministry of Finance around full implementation,” he explained.

Last week Minister of Finance Chris Sinckler signaled in Parliament the Government’s intention to raise the VAT from 17.5 per cent to 22 per cent on cell phone service.

He later explained in an interview with
Barbados TODAY that the initial plan announced during his June 15 Budget, which called for a three cent tax to be charged on mobile airtime, was proving too difficult and expensive for the telecommunications companies to implement.

Sinckler further revealed that instead of the $32 million in revenue, which was originally forecasted, Government was now expected to raise about $15 million from the levy.

Speaking to reporters last evening on the sidelines of the FLOW’s Christmas promotion launch in Holetown, St James, Sheehy said while he expected the 4.5 per cent VAT hike to impact the revenues of both local service providers, he did not anticipate any erosion of FLOW’s customer base.

“In terms of the actual share of wallet, the reality is that people will probably spend the same amount of money. It will mean that we as providers would likely get less, and as always people will look for alternative ways to communicate, more cost effective ways, and we are seeing that every day,” explained Sheehy.

However, “we just have to make sure we provide them [customers] with alternative ways, be that on the fixed network or how ever they want to communicate,” he said, while noting that the company experienced good growth in mobile customers this year.

He expects the growth trend to continue in spite of the tax, which is to be collected by the telecommunications company on both prepaid and post paid airtime, and paid to the Government via the Barbados Revenue Authority (BRA).

Efforts to get a comment on the matter today from Digicel’s CEO Johnny Ingle were unsuccessful.

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