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Taxes on VoIP Services Could Increase, Leading to Higher Prices

TMCnews Featured Article

December 14, 2010

Taxes on VoIP Services Could Increase, Leading to Higher Prices

By Ed Silverstein, TMCnet Contributor

VoIP (voice over Internet protocol) services may be subjected to higher taxes, leading to higher prices charged to consumers and businesses, according to recent media reports.

VoIP Watch predicts taxes will rise on online calling companies in 2011, because local and state governments need to increase their review – to pay for everything from snow plowing to teacher salaries/benefits.

Many local and regional governments lost revenue with the replacement of landline and pay phones with the advent of newer technologies.

Even without technological improvements, it comes as no surprise, too, that states, such as California, are struggling to keep their government afloat – and will use whatever tax revenue they can get.

Much like putting a tax on beer or cigarettes, state and local governments know that VoIP service will be in demand, pretty much no matter what happens to the economy. That makes them a stable product on which to place a tax. Changes in price will not affect demand that much.

But that of course leads to higher prices. Beth Pinsker, executive editor of Dealnews, says VoIP service prices will increase in 2011. In fact, it was on her list of 20 things that will likely see price hikes next year.

About five or six year ago, the National League of Cities pushed for increased taxes on VoIP services, because the group sensed that older forms of phone service were being replaced.

Back then, it was estimated that telecoms contributed $22 billion annually to local tax revenue, USA Today reported.

The market for VoIP is strong. Garrett Smith (News - Alert), director of marketing and business development at VoIP Supply, told TMCnet’s Erik Linask (News - Alert), in a recent interview, that overall, the VoIP equipment market is on the upswing after the lull of the recession.

Ed Silverstein is a TMCnet contributor. To read more of his articles, please visit his columnist page.

Edited by Tammy Wolf

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