Taxing mobile connectivity in Latin America
Mobile connectivity is a key enabler of digital inclusion and economic and social development. The mobile industry in Latin America and the Caribbean contributed more than $260 billion to the regional economy in 2016. This represents 5% of the region’s total GDP and supports 1.7 million jobs. Although 300 million people – half the population – in the region subscribe to mobile internet, there is room for further growth: for comparison, 65% of the population in Europe and North America are connected to mobile internet.
The positive contribution of the mobile sector to the economy is well recognised. However, the tax treatment of the sector is not always aligned with best-practice principles of taxation, and may distort the continued development of the sector.
Faced with considerable challenges in having to balance public sector budgets, some governments in the region apply additional, sector-specific, taxes on consumers and mobile operators. In 2016, the mobile sector in Latin America paid, on average, 25% of its revenues in the form of taxes and regulatory fees. This figure was even higher in Jamaica and Brazil, where tax payments exceeded 40% of mobile sector revenue.