Last week saw an Irish minister having to make an extraordinary comment – following comments made by a fellow politician, our Finance Minister Michael Noonan ruled out levying a tax on SMS messages. Though, rather ominously, he did use the phrase “at this time.”
What’s the story?
Like many other countries, Ireland is currently struggling under the astounding financial burden of the global economic downturn. As one of the three countries that’s really putting the Euro-zone under pressure, it’s essential that Ireland bolsters and stabilizes it’s economy. Which can lead to some pretty extraordinary suggestions – such as when a member of the Irish Parliament, Aodhán Ó Ríordáin (it’s pronounced Ay-on), suggested placing a tax on the sending of SMS. His logic was that text messages are a “luxury” and that should be taxed as such.
Luckily, our Minister for Finance disagrees. He had several reasons for opposing the tax: that there is already a 21% VAT on SMS; that it would be impossible to estimate a yield from implementing it; and that it could cause unpredictable behavioral shifts both in consumers and operators.
What we think?
I think Minister Noonan hit the nail right on the head when he mentioned behavioral impact. I don’t want to get into a debate of definitions, where we can get into an endless circular argument about whether or not SMS fall under the “luxury” or “essential” banner. The important thing here is that if you start putting taxes on texts, people will stop using them. Just look at plastic bags. In Ireland, we used to have a problem where plastic bags festooned every tree, hedge and road in Ireland. They were everywhere. In order to clamp down on this, a fee was levied on the use of plastic bags – you had to pay for them now, instead of getting them for free with your groceries. The fee was incredibly low, only a couple of cent, but people stopped using plastic bags. They bought tougher carry bags, and re-used them.
It seems reasonable to me that if you placed a levy on SMS in Ireland, the exact same thing would happen. It would be the biggest possible boon imaginable you could grant to IM providers. Because you can be sure that the tax on SMS wouldn’t be shouldered by the operators. No, those costs would be bounced straight down to the consumers faster than you can type “y r txts so $$$ now?” As soon as a reasonably easy, untaxed option became available, there would be a cascade of use. People would flock to free IM services in huge numbers. It would be a bonanza for them – and that would be an incredible kick in the pants for mobile operators.