The Text Tax

It has been suggested by the Green Party that a 1c tax on text messages would raise some much needed funds for the public purse, in the current economic crisis. This has been referred to as as “unfair and injust” by Tommy McCabe, director of the Irish Cellular Industry Association (ICIA) - see story here.

How much revenue do we think this would generate? According to the Irish Examiner, a record two billion text messages were sent by Irish mobile phone users in the final three months of last year. Say we assume that this is a steady state level of texting, and that a 1c tax would not deter anyone to send a text. With these assumptions made, then the 1c text tax would produce 8 billion cents in revenue per annum, or an annual sum of 80 million euro.

This is all well and good, but I would like to know more about how this tax would be collected. What I have been able to find is a news story from 2006 which suggests that European Union lawmakers have already considered tax on e-mails and text messages as a way to fund the 25-member bloc in the future. Also, a text message tax was introduced in Sacramento, California last December (see story here). The city sent out letters to telecommunications companies to instruct them to levy the tax on customers' bills.

This is an interesting development in the economics of information. While I don't yet have any fears about negative consequences for the widespread distribution of information, comminication taxes could be undesirable if they prevent useful information exchange. Especially in the so-called Information Economy. On a related note, it was announced yesterday that UCD won SFI strategic research cluster funding of €3.56 million - which will be focused on "data analytics".