The Latin American mobile industry contributed an estimated U.S.$177 billion to the economies of Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Panama, Peru and Uruguay, representing 3.5% of the region’s GDP, according to two reports released by GSMA and AHCIET, both undertaken by Deloitte. However, higher taxes on the mobile industry hinder the adoption of new services, such as 3G mobile broadband and machine-to-machine services, and mobile usage generally, according to Tom Phillips, chief government and regulatory affairs officer at GSMA.
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There are a number of cases where mobile telephony is taxed more heavily than other sectors of the economy. Brazil and Colombia, for instance, impose higher sales taxes upon mobile consumers compared to other sectors, with consumer taxes accounting for more than a third of call charges in Brazil. Additional luxury taxes are also imposed on mobile consumption in Argentina, Mexico and Panama. Consumers in Argentina also pay high taxes for handsets, which can make up more than half the cost of owning a mobile.
The mobile industry is an important contributor to economic success, said Phillips who also pointed out that when countries have lowered mobile-specific taxes, it encouraged greater usage, boosting the economy, consumer benefits and government tax receipts.
The GSMA study shows that some countries in the region suffer from high mobile-specific taxes which threaten the ongoing development of the mobile industry and uptake of innovative services. The mobile operators in the nine countries studied in the report, employ more than 107,000 people with approximately 890,000 people employed within the region’s wider mobile ecosystem.
In 2011, mobile operators and other players in the Latin American mobile ecosystem paid almost U.S.$54 billion to national governments in taxes and regulatory fees, an increase of 30% compared to U.S$42 billion in 2008. The GSMA study shows that the penetration and usage of mobile services in Ecuador and Uruguay dramatically increased following the removal of mobile-specific taxes in 2007 and 2008. Conversely, in Mexico and Panama, where taxation recently increased, penetration and usage have both contracted.
Phillips highlighted that policymakers and governments throughout Latin America need to recognize the potential of the mobile telecommunication industry and the harmful impact of excessive taxes. He cited the recent change in Brazilian legislation that reduced taxes on M2M services. Phillips said that such moves represent a positive step for the industry and further action to remove discriminatory taxes could spur the development of the mobile industry, benefiting consumers and businesses and boosting the region’s economy.
According to the 11-country AHCIET report, information and communications technology (ICT) network operations generate expenditures within each Latin American economy, through operator investments and payments to the wider ecosystem, in addition to the GDP generated by consumer payments for ICT devices and services. These activities create added value, contributing to the country’s GDP throughout the entire ecosystem.
Taxes are also an issue in this segment. Pablo Bello, general secretary of AHCIET, said that taxes on the ICT industry act as barriers to connectivity and restrict investment, something which proves to be especially harmful for people with lower incomes.
Bello added that given Latin America’s need for greater mobile broadband and ICT development, supportive taxation policies can be an effective tool to stimulate demand for these services and promote investment. As such, Bello said governments should account for the cost of foregone benefits when evaluating taxes on mobile and ICT consumers and operators, and consider targeted tax reductions to achieve their broadband policy objectives.
