Saturday December 1, 2012

Mobile telephony and taxation impact in Latin America 2012

Person looking at mobile phone smiling, light is reflecting on face in dark room

Mobile telecommunications makes a significant socio-economic contribution, estimated as more than USD 177 billion across nine Latin American countries, including Brazil, Mexico, Argentina, Colombia, Chile, Peru, Ecuador, Uruguay and Panama. However, high taxation on mobile consumers and operators has a damaging impact on this potential. Lowering the taxation levels could benefit consumers, businesses and governments by encouraging take-up and use of new services (e.g. mobile broadband and Machine-to-Machine (M2M)), improving productivity and boosting Gross Domestic Product (GDP) and tax revenues.

High sector-specific taxation is hindering the mobile telecoms potential Take-up of mobile services has increased rapidly in the last 10 years across Latin America. The majority of the population in each country now has access to mobile telephony compared to less than 20% in 2000. The take-up of 2G is significant and there is substantial scope for development of 3G and 4G services. The mobile telecommunications industry generates significant economic and social benefits.

Mobile operators and the wider ecosystem make direct contributions to a country’s GDP. Further economic benefits are also created through productivity gain and intangible benefits. Despite these widely acknowledged advantages, in some Latin American countries mobile consumers face special communication taxes and operators are also burdened by numerous taxes and fees. These punitive sector-specific taxes are distortionary and counterproductive to the digital economy and growth agenda. Policymakers and governments are beginning to recognise the potential of the mobile industry and the harmful impact of excessive taxes.

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