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Beyond money, we need data
Beyond tax collection, there are many ways in which ICT industries can contribute, especially in developing countries like Indonesia.
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A technician from telecommunications operator PT Indosat carries out maintenance work at one of the company’s base transceiver stations (BTS) in Jakarta. (JP/Ricky Yudhistira)
I
nformation and Communication Technology (ICT) companies are often associated with the prosperity characterized by highly profitable business models, employees with hefty payouts or CEOs with skyrocketing bonuses and fabulous perks.
This sector often serves as a rescuer in unforeseen circumstances. Take the European financial crisis, when the authorities in Greece, Hungary, Spain, France and Slovakia used their latitude to impose taxes targeting the telecommunications companies.
There is a reason for this. The European Commission reported that the productivity of ICT companies is generally 50 percent greater than that of nonICT companies and has been relatively constant during the last decade. Moreover, the productivity specifically in the telecommunications industry is greater by a factor of three compared to the other industries.
The picture is more staggering if we take into consideration that most ICT industries are well distinguished by the abundance of intellectual property compared to other industries.
A study by Prof. Ove Granstrand (1999) estimated that the value of intellectual property owned by major ICT companies like Microsoft and Intel was as large as 80 percent of the combined Gross Domestic Product (GDP) of the Sub-Saharan African countries. It is hard to imagine that the performance of companies is comparable with the whole economic activity not only in one or two but in an entire group of countries.
Thus, as the productivity level strongly corresponds with the prosperity of the industry, one might argue that from a public policy point of view, charging a specific tax on the ICT industry is just a way to redistribute wealth.
The long dispute between Indonesia’s government and Google might be a case in point: After a see-saw debate, the two parties finally came to an agreement of an undisclosed amount of tax settlement this month.
