Tax reform needs to stimulate connectivity – 04/19/2023 – What tax is this

Which country would not like to encourage a measure that would, at the same time, have a positive impact on GDP, health, education, industry, agribusiness, retail and services? Imagine that this measure was capable of generating efficiency in all productive sectors, including public management and the environment. The question is so obvious that it hardly deserves an answer.

An unthinkable scenario for a country to do just the opposite and adopt a policy that suffocates all these blessings. Because that is precisely what has been happening for years in Brazil with its very high tax burden on connectivity.

According to a Nokia study, 5G will have an impact of no less than US$ 1.2 trillion on GDP by 2035. The areas most benefited will be those involving technology, information and communication.

The outlook is also exciting for other key sectors. According to the Ministry of Communications, agribusiness GDP should grow by 10% with the arrival of technology in the countryside. Health will benefit greatly from telemedicine and the possibility of remote surgeries, for example. Public safety and urban mobility will be much more efficient. Retail will be leveraged with the increase in e-commerce. All productive sectors will benefit from the new solutions involving the fifth generation mobile internet. This subject will be discussed in depth at the Telebrasil Innovation Panel, on June 14, in São Paulo.

According to the International Data Corporation, 5G has the potential to move US$ 25.5 billion in the country by 2025, considering only the boost of technologies such as artificial intelligence, data analysis, cloud, security, augmented and virtual reality and internet of things. That is, creating mechanisms that facilitate data transmission proves to be the best way to increase productivity and economic growth. By understanding that human empowerment and, above all, digital inclusion, are becoming increasingly important for the contemporary labor market, it is clear that connectivity is also imposed as a tool for social equality.

Because the telecom sector in Brazil receives one of the highest tax burdens in the world, reaching 42%, well above the average of the fifteen countries that most access broadband in the world, which is 11%. Even more worrying is to observe that some states made a move to increase the ICMS modal rate after the reduction occurred in the middle of last year, returning to burden the segment more. The sector had to take a stand against the piecemeal reform contained in the creation of CBS and the change in taxation on interest and dividends, as both represented an even greater increase in the tax burden.

In this sense, it is essential to reflect on what the country intends to tax precisely the element capable of generating great economic and social advances. We support the Tax Reform and it is more than necessary, but it is necessary to point out that it needs to move in the direction of broadly and significantly reducing the weight of taxes on telecommunications, as it is the sector that has the greatest innovative transversality for the economy digital.

If Brazil intends to achieve perennial economic stability and attract long-term investments, it should no longer allow short-term solutions. The most perverse effect of weighing the hand on taxes on connectivity is to harm the lower income population more severely. The most contradictory —and even ironic— consequence has to do with foregoing much greater revenue that would be generated by the cascading effect of the development of the digital economy.

From any point of view, there is no defense to maintain —much less increase— the taxation on the sector. Brazil needs measures that encourage economic and social promotion and to prosper in these initiatives today necessarily involves stimulating connectivity.

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