Call tax may anger US

“If Jamaica is looking for help from us, they may find it more difficult,” said officials from the Office of the US Trade Representative (USTR) regarding the budget proposal. “There is no clear deadline but Jamaica is only making it harder for themselves.”

USTR, an agency of the American government that handles international trade agreements and disputes, has been monitoring the cess, which it calls a surcharge, since its implementation in 2005.

The surcharge on international calls terminating on mobile networks here will be increased to 7.5 US cents ($6.50) per minute, up from two US cents a minute.

It is not clear whether the charge on international calls to fixed lines, currently three US cents per minute, will change.

A $0.30 per minute tax on all domestic calls will be imposed on June 1.

Previously, the cess, called the universal service levy, was earmarked for the Universal Access Fund, which bring broadband internet to remote parts of the island. But the government plans to use the new revenue to cover its general expenses.

The taxes have been controversial since their implementation.

US long-distance carriers lashed out and tried to get Washington to actively oppose the tax, but were forced to pay under threat of their services being blocked.

Finance Minister Peter Phillips said yesterday that the revenue measures, aimed at raising $5.25 billion over the next nine months, was “just plugging a gap”.

However, International Telecommunications Union (ITU) regulations require that countries that levy a tax on international services should collect the revenue from domestic customers.

Phillips said that there were particular exemptions that would allow the tax under the various agreements that relate to Jamaica’s telecommunications sector. “The lawyers can determine that … and the diplomats”.

USTR is concerned because US operators and consumers “have born the bulk of the expense, given that 80 per cent of Jamaica’s incoming calls originate in the United States”.

The volume of traffic from America to Jamaica decreased by 41 per cent, between 2009 and 2010, and US carriers’ payments to operators in Jamaica decreased by 39 per cent, according to USTR’s 2012 review of compliance.

Data from the Office of Utilities Regulations (OUR) supports USTR’s numbers, showing that the decline in incoming traffic mostly occurred on mobile networks, on which most international calls still terminate.

Up to press time, local telecoms firms were still trying to figure out what the impact of the tax change will be on their business and were seeking clarity from the finance ministry, particularly as it relates to the 30 cent tax on domestic calls.

Local call minutes are well over 15 times the number of incoming international minutes. So the revenue from the two taxes should be roughly the same.

But USTR officials pointed out that the rate on foreign carriers would still be 21 times that of the domestic charge.

In its April review, USTR said that the American telecoms regulator – the Federal Communications Commission (FCC) – has held that “universal service obligations that are levied disproportionately on foreign-originated calls clearly violate” the principles of Jamaica’s obligations under international trade rules.

“It’s disproportionately burdening foreign firms,” USTR officials told the Jamaica Observer. “I don’t think this is going to help things at all. Everybody has a right for universal service, but it should be fair.”

They added that termination rates in the US are as low as two US cents.

The federal agency had strongly urged Jamaica to allow the surcharge to expire as scheduled last May.

“Originally, we thought it would expire,” said the officials. “That deadline has past. We are going to keep letting them know we aren’t happy about it.”

Last June, the then Government approved the continuation of collection of the levy.

Two weeks ago, the technology minister said that the Universal Access Fund Company (UAF) would assume direct responsibility for managing the revenue collected from international calls terminating in Jamaica.

“The law will allow the (UAF) board, now, to receive the money,” said Phillip Paulwell. “So, no longer will the money go straight to the Ministry of Finance into the consolidated fund.

The Government collected $7.5 billion, or approximately US$88 million from the surcharge, between June 1, 2005 and December 31, 2010, according to USTR estimates.

It spent $4.3 billion through the e-learning project and the UAF, between 2008 and early 2012, according to past budgets.

Spending on those projects are expected to run over $1.5 billion this fiscal year.

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