Call for tax deductible broadband
In the run-up to Minister Manuel’s 15 February 2006 Budget Speech, Wireless Business Solutions (WBS) has appealed for broadband Internet costs to be tax deductible for individual taxpayers, claiming it will help lift South Africa's broadband penetration rate, which acording to research could have a positive effect on the countries GDP.
According to Thami Mtshali, CEO of WBS: “Encouraging greater uptake of high-speed, always on Internet access through a broadband tax incentive aimed at individual end users will help lift South Africa’s broadband penetration rate of 0.3% out of the doldrums with all the associated benefits for the country.”
Black-owned WBS’s wireless broadband network uses iBurst technology enabling high-speed mobile Internet access.
Further explaining his tax break call, Mr Mtshali said: “Making broadband tax deductible for individual taxpayers would translate into increased disposable income likely to be used for productive endeavours such as reducing debt or investing in education.
“To illustrate, Unisa's Bureau for Market Research found that the second-highest percentage increase (up 21.4% per year) in household expenditure by black consumers between 1993 and 2003 was on education.
“Put more money in people’s pockets and they’ll generally invest in things that will improve their quality of life,” said Mr Mtshali.
Other benefits for South Africa include the fact that broadband boosts Gross Domestic Product (GDP). For example, a recent Australian report estimated that increased broadband penetration would lift that country’s GDP by between 0.5 and 2.5%.
As the economy powers towards the 6% GDP growth target set by President Mbeki nothing will push SA well over that target in the future as a massive uptake of broadband by hundreds of thousands of individual users given added incentive in the form of tax breaks. The benefits will be most noticeable in underserviced areas where mobile broadband is able to rapidly fill the void left by the absence of landline technology.
Less tangible benefits include the fact that high-speed Internet access promotes human rights by encouraging openness and fueling debate in societies undergoing transformation. Broadband also provides greater access to educational information, expanded curricula and real-time collaboration amongst students. In health care, broadband will enable the practical implementation of telemedicine.
Costs associated with broadband Internet access are currently only tax-deductible for individuals who work from home or who use their broadband connection for business purposes.
“Simply because one is not using broadband as a small business owner, does not mean that the associated costs should not be tax deductible for individuals. This ignores the fact that broadband is used at home by people looking for employment, study opportunities and engaging in other activities that benefit the economy,” concluded Mr Mtshali.
South Africa is experiencing massive tax revenue overflows with between R30 billion and R60 billion predicted this year alone. Add this to the fact that a panel of overseas experts visiting the country recently asked Minister Manuel to be "bold and ambitious" in targeting key areas that could stimulate growth and you have a compelling case for the view that broadband should be tax deductible for individuals.