Brazil's high payroll taxes are a hindrance for competitiveness, while broadband taxes in Latin America undermine demand.
BY CHRONICLE STAFF
Luciano Coutinho, president of Brazil’s development bank BNDEs, acknowledges the country’s payroll taxes are a “hindrance” for competiveness.
“Maybe one of [the] high hindrances is the high tax on payroll,” he told the Latin Trade Symposium in Miami. “We understand this is a critical factor for making the IT sector…competitive.”
Coutinho made his comments during a panel that talked about technology and other issues.
Brazil’s overall tax climate is the worst in Latin America, according to the Latin Tax Index from Latin Business Chronicle.
John Davies, vice president and general manager of Intel’s World Ahead Program, pointed to the success Colombia had when it lifted a 17 percent value added tax on computers in 2007 and saw a 60 percent increase in computer sales the next two years.
Luis Guillermo Plata, who was Colombia's trade minister at the time, added that the government also removed a tax on the wireless taxes that similarly led to a boom in the wireless sector.
Too high taxes are also part of the reason why Latin America lags developed countries when it comes to braodband penetration, Davies pointed out. Broadband exenses in Latin America are the equivalent of 12 percent of a monthly income. That compares with only one percent in the Organization for Economic Co-operation and Development (OECD), a group of mostly developed countries.
“Salaries are lower [and] taxes are higher [in Latin America],” Davies said. Taxes around 13-14 percent “take millions out of affordability.”
Alexandre Hohagen, the Latin America managing director for Google, agreed. "We need to reduce the cost of connecting [to broadband]," he said. "It's still very high."
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