GSMA Report Highlights the Importance of Fiscal Reform to Promote Digital Inclusion and Economic Growth in Argentina

Reducing Excessive Mobile Sector-Specific Taxation Would Promote Connectivity and Provide a Cumulative Fiscal Gain of up to US$5.3 Billion over Five Years

Buenos Aires: The GSMA today announced findings from its latest report, Reforming mobile sector taxation in Argentina: A path towards a more efficient tax system, greater digital inclusion and increased prosperity'. The report provides an overview of the tax and fee regime applied to mobile services and its impact on the take-up and usage of mobile services in Argentina. The report recommends that the implementation of three tax reforms would benefit the broader economy and the government's fiscal position, while driving mobile adoption and delivering associated benefits to citizens across Argentina.

The mobile industry plays an increasingly important role in supporting and delivering development, economic growth and social inclusion, said Sebasti n Cabello, Head of Latin America, GSMA. In Argentina, the mobile sector contributes significantly to the economy and will be key to the country's digital future. However, reduced affordability due to high levels of mobile-specific taxation is constraining the potential for further growth, particularly amongst low income groups who would benefit most from access to the mobile internet.

Key Report Findings

The report shows that in 2016, the mobile industry in Argentina contributed US$1.7 billion to the economy, or 0.3 per cent of Argentine GDP. Findings from the study demonstrate the distortionary impact of sector-specific taxation, highlighting the potential economic benefits of rebalancing sector-specific taxes and regulatory fees:

Argentina has the second-highest total cost of mobile ownership (TCMO) for a basic 500MB basket in the Latin American region, equivalent to over $21 per month.

Despite high unique subscriber penetration (92 per cent) and connection penetration (140 per cent), usage of mobile services remains low in Argentina compared to other countries in Latin America. With mobile providing access to life-enhancing services like mobile money and mobile health, the social benefits of increased usage are significant.

Taxes on the mobile sector are disproportionately high, compared to other sectors and international benchmarks. The tax burden in Argentina (44 per cent) is high compared with other Latin American countries, such as Colombia (16 per cent), El Salvador (14 per cent), Guatemala (11 per cent), Mexico (19 per cent), Peru (12 per cent), and Uruguay (17 per cent).

The mobile sector is heavily taxed at multiple levels of government: federal, provincial and municipal.

Mobile-specific tax payments are equivalent to around 10 per cent of total mobile sector revenue. This is one of the highest shares in Latin America, surpassing other countries such as Brazil (7 per cent), Mexico (3 per cent) and Chile (0.1 per cent).

Report Recommendations

Through policy reform, in the next five years the Government of Argentina has the opportunity to simplify and rebalance the current tax system applicable to the mobile sector, while also realising its wider tax agenda. The report proposes the Argentina government implement three tax reforms, starting with the removal of the 17 per cent excise duty on electronics and the 4.2 per cent excise duty on mobile services (Impuesto Interno), as well as the elimination of the 6.7 per cent provincial turnover tax (Ingresos Brutos). Each of these reforms would increase adoption of mobile, particularly amongst low income groups, spur the migration to smartphones and 4G networks, increase usage per subscriber, and result in lower prices for both households and businesses.

The report outlines the impact of tax reform on the mobile industry:

The removal of the excise duty on electronics would lead to 440,000 new unique subscribers and more than 19,000 new jobs;

The removal of the excise duty on mobile services would lead to around 1 million new unique subscribers and more than 16,000 new jobs; and

The elimination of Ingresos Brutos would lead to around 1.6 million new unique subscribers and more than 25,000 new jobs.

Finally, the report highlights that these reforms will be self-financing in terms of their impact on government revenues, with the three reforms showing a cumulative fiscal gain of up to US$5.3 billion over five years from now to the end of 2022.

Cabello added, As a comprehensive taxation reform is being assessed in the National Congress, the timing is now for Argentina to consider a more efficient and inclusive way of taxing mobile services. It is essential that we make these reforms to allow Argentina to maximise the economic and social benefits of mobile by encouraging the growth of the digital economy, which will be key for the country's future.

The report can be found at: www.gsma.com/mobiletaxation-argentina.

-ENDS-

About the GSMA

The GSMA represents the interests of mobile operators worldwide, uniting nearly 800 operators with more than 300 companies in the broader mobile ecosystem, including handset and device makers, software companies, equipment providers and internet companies, as well as organisations in adjacent industry sectors. The GSMA also produces industry-leading events such as Mobile World Congress, Mobile World Congress Shanghai, Mobile World Congress Americas and the Mobile 360 Series of conferences.

For more information, please visit the GSMA corporate website at www.gsma.com. Follow the GSMA on Twitter: @GSMA.

Media Contacts:

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+5491132519811

maccurso@gsma.com

Cara Delaney

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Cara.Delaney@webershandwick.com

GSMA Press Office

pressoffice@gsma.com

LINK:	https://www.gsma.com/newsroom/press-release/gsma-report-highlights-the...
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