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Telecommunications Service Tax Bill 2009

TELECOMMUNICATIONS SERVICE TAX BILL 2009

SECOND READING SPEECH

By the Minister for Finance
Hon Dr Kieren Keke, MP

21st August 2009

Mr Speaker and Honourable Colleagues,

This short Bill serves to legislate the implementation of a 2009 Budget Measure. Members of this House, in approving the 2009-10 Budget, agreed in principle to only a relatively small number of new revenue raising measures in this financial year. One of these measures was the imposing of a new tax on telecommunication services.

From the time of the first public announcements made by the Minister for Telecommunications on the negotiations Government had begun with Digicel, the Minister foreshadowed that part of the agreements with Digicel included that Government would impose a tax on all telecommunications services of between 10-15 percent.

As part of the agreement, including Government’s investment in Digicel (Nauru), Government has agreed to a range of fiscal incentives to both secure Digicel’s investment in Nauru and to ensure that the business will be viable and thus ensure quality services to our people.

However, Digicel agreed from the first negotiations that up to 15% of the sales revenues would be passed onto Government thru this tax, providing another source of revenue for Government to assist the delivery of other essential services including health and education.

This requirement has been incorporated into both the Telecommunications Licence issued to Digicel and the Shareholders Agreement between Digicel and Government.

This Bill simply provides the legal provision to enable this tax to be imposed on Digicel (Nauru), and for that matter, any other telecommunication service provider on Nauru.

For our people and all customers, there will be no noticeable effect or difference as a result of this tax. The services will be sold for a retail price, whether that be for pre-paid phone cards, SMS costs, any other telephone charges as well as internet bandwidth charges. Digicel will simply be required to take 10% of this and transfer this amount to Government on a monthly basis.

The Finance Department has made conservative estimates that this will generate approximately $98,400 per annum in new revenue for Government. This has already been incorporated in the Budget. The actual amount will depend totally on how much people use telecommunication services and how well the Digicel business does.

Given that Members have been advised of this through several statements delivered by the Minister for Telecommunications and through the revenue policy measures announced in the 2009 Budget, I trust that the purpose of this Bill is well understood and can be quickly accepted by Members.

Given the imminent launch of Digicel services, I trust Members appreciate the need for swift passage of this Bill and I trust that Members will also appreciate the workload that our Parliamentary Counsel has been under which has meant that this Bill has been introduced late in this sitting. Whilst this is not ideal, I look forward to Members support of this Bill, given the endorsement of this in principle in the Budget and recognising the need to have this in place before Digicel launches its services.

Mr Speaker,

With these few words, I commend the Bill to the House.

Thank you.