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VoIP gets level pegging in Panama

Panamanian lawmakers OK a tax that treats traditional and Internet phone calls the same way, a "technology agnostic" regulation that has had a mixed welcome from VoIP providers.

Panama is set to introduce a tax that treats traditional and Internet phone calls the same way, a "technology agnostic" regulation that has had a mixed welcome from broadband phone providers.

Last week, lawmakers in the Central American country approved a regulation that will impose a 12 percent tax on all international calls, including those that use voice over Internet Protocol (VoIP) technology to make phone calls over a broadband connection.


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The tax, which goes into effect in March, is another sign that VoIP is gaining mass-market acceptance as a way to make international and long-distance calls. VoIP calls are typically cheaper for customers than those connected via privately owned telephone networks.

Currently, about 11 percent of all voice traffic worldwide is classified as VoIP, but less than 1 percent of those calls is initiated on a VoIP phone linked to a computer, as opposed to a regular home phone.

But as more calls find their way off traditional phone networks and onto the Internet, regulators say governments risk losing billions of dollars in telephone tax revenue, which typically goes toward supporting universal services . Panama, for instance, is estimated to have lost $12 million in taxes through people using the Internet to make international calls.

VoIP providers, currently embroiled in a struggle over industry oversight in the United States, have bristled in the past at any suggestion of regulation. However, some companies said on Tuesday that they are beginning to warm up to a technology-agnostic approach.

Bryan Weiner, the president of Net2Phone, Panama's largest VoIP provider, said he supports Panama's "one law covers every technology" approach. One argument in its favor is that the 12 percent tax would usually work out cheaper than the levy of $1 per international call it replaces.

"Some might say it's bad news, because it's a tax," Weiner said. "As long as it's a level playing field, we're happy."

But Huw Rees, a spokesman for broadband phone service provider 8x8, said the new approach sounds as "confusing and convoluted" as earlier attempts to regulate the VoIP industry. For instance, Internet phone providers routinely don't charge customers for calls to other subscribers. If they followed Panama's lead, governments taxing those calls would collect "12 percent of zero, which is zero, I guess," Rees said.

"We're not trying to break the law. But some of them are pretty foolish."

Turkey and Pakistan are also expected to adopt telephone rules that, like Panama's, treat VoIP providers no differently than traditional phone providers.