Brazilian telecom operators call for auto industry-like tax cuts

Brazilian telecom operators want a tax cut program for smartphones, PCs and other communication devices based on the same model as an initiative recently announced by the government for cars.

The main objective is to foster the acquisition of 5G smartphones by low-income tiers to accelerate the use of the network and, consequently, the expansion and monetization of the new technology by operators.

“We need to massify 5G. In Brazil, we exempted [from tax] cars. Why not also do the same with digital devices, for the low-income population?” Marcos Ferrari, head of local telcos association Conexis Brasil Digital, said during the Febraban Tech financial technology event in São Paulo.

Ferrari, who spoke on a panel about 5G and IoT connectivity at the event, was referring to the recently announced government initiative to cut tax on cars by between 1.5% and 10.96%.

The tax benefit had been requested by the auto industry as a way to reduce car stocks and boost sales. Meant to be a short-term measure, the federal government just renewed the benefit.

“We are a private sector, driven by demand. We have the demand for the mandatory network coverage [related to the 5G auction]. But we will deploy 5G faster or slower depending on demand.”

Talking to BNamericas and local journalists, Ferrari said that operators have not yet taken the idea to the government, as details are still being considered.

But operators have already had meetings with smartphone manufacturers to seek a common understanding and take a proposal to the government, he said.

Ferrari said, in addition to smartphones, the problem of weak demand is not the price of broadband – which he said is among the lowest in the world – but the population's income.

“Having a tax cut program focused on income and not the price [of the device], is something that makes a lot of sense, since we have around 20mn people still unconnected in the country,” said Ferrari.

“The dream of the past was to have a vehicle; the dream of the future is to have a device to connect to the internet."

TAX REFORM

Ferrari also defended differentiated rates for the sector in the ongoing tax reform discussions, although not for devices.

In general, the industry expects a reduction of up to 50% in the total tax burden levied on telecom services, compared to what it is today.

The industry expects the rate of the to-be-created unified service tax, CBS, to be 7.5% for telecoms, said Ferrari. 

The entity had a recent meeting with the rapporteur of the tax reform bill in the lower house, Aguinaldo Ribeiro, and with finance minister Fernando Haddad, to discuss the matter but left it without receiving a firm commitment.

Despite the difficulties, Ferrari said that 5G is already available for cities where about 40% of the Brazilian population lives.

This coverage was reached in about 10 months of operation of the 3.5GHz 5G network. 

In comparison, according to Ferrari, 4G took two years to reach that same level of coverage.

In addition to taxes, he said other obstacles to the expansion of 5G are municipal laws for installing antennas and towers, and the need for skilled and technical labor.