Tax burdens could hit LatAm mobile development

01 NOV 2017

LIVE FROM GSMA MOBILE 360 LATIN AMERICA, BOGOTA: Mobile connectivity is “over-taxed” in many Latin American markets, potentially hindering the continued development of the sector, the GSMA warned in a report.

“In Latin America, the total cost of mobile ownership is above the 5 per cent of income threshold recommended by the UN Broadband Commission. Some governments in the region apply additional sector-specific taxes on consumers and mobile operators, leading to negative affordability and investment impacts. In the current economic climate, it is paramount for governments to foster, not hinder, growth,” said Sebastian Cabello, head of GSMA Latin America.

The report, Taxing Mobile Connectivity in Latin America, found that in 2016, the mobile sector in the region paid, on average, 25 per cent of revenue in the form of taxes and regulatory fees. And consumers face sector-specific taxation in addition to general value added tax in 11 of the 20 countries studied.

It also said markets featuring higher levels of sector-specific taxes as a proportion of market revenue tend to have lower affordability levels and in all markets where information is available, the cost of buying a handset and 1GB of data per month is above the 5 per cent income threshold recommended by the UN.

Rebalancing sector-specific taxes and regulatory fees can promote connectivity, economic growth, investment and financial stability, the industry association noted. A number of best practices were highlighted in order to align mobile taxation with other sectors and in line with recommendations from organisations such as World Bank and IMF.

This included the reduction of sector-specific taxes and fees to increase demand and incentivise investment, which would lead to an overall growth in tax revenue over the medium term; reduced complexity and uncertainty of taxes and fees; and removing consumer taxes which target mobile services in order to ease affordability for the lowest earners in the region.

Other recommendations included supporting effective pricing of spectrum to enable better quality and more affordable services; avoiding excessive spectrum auction prices being used to raise revenue for governments over-and-above mobile operators’ fair tax contributions; and implementing supportive taxation for emerging services such as IoT.

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Steve Costello

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