Study proposes elimination of selective tax on the telecommunications sector

SANTO DOMINGO. The implementation a reduction plan o elimination of the impuestos a technological equipments de low end would positively impact al telecommunications sector, creating market expansion and new investment opportunities, while drive the growth of e-commerce to figures on the US $ 1,088 million.

This is one of the main conclusions of the study. “Information technologies: macroeconomic, market and tax aspects on the sector in the Dominican Republic”, in charge of researchers Shajira Nazir and Alberto Veloz, which was presented by the Instituto Tecnológico de Santo Domingo (INTEC) and National Observatory of Information and Communication Technologies (ONTIC-RD).

By offering the words of welcome to the event, Julio Sanchez Marinez, rector of INTEC, called to work for further bridging the digital divide and make possible a digital transformation in the Dominican Republic. In that sense, nelson brook, President of the Board of Directors of the Dominican Institute of Telecommunications (Indotel), considered that in order to guarantee the closure of the digital divide and that this translates into development, it is necessary to seek solutions.

In this sense, the official, who participated in a panel in which the results of the study were analyzed, reported that Indotel will develop a fiber optic connectivity plan in 23 municipalities of the country that do not have this type of connection, with an investment approximately 80 million dollars.

Study approaches

The analysis raises the Elimination of ITBIS and tariffs to Cell phones under US$300 and tablets under $500 and selective consumption tax on prepaid service cards under RD$300. He estimates the reduction of these taxes at around US$350 million, which would be offset by capital investments, an increase in the share of communications in GDP, and would directly benefit consumers with a cost reduction between 39% and 28%.

The data on the performance of the telecommunications sector show a reduction in its contribution to the economic development of the country. The percentage participation of the sector in the GDP was 1.67%, in 2011 and was reduced to 0.80% in 2021. This decrease translates into potential restrictions to the growth of other sectors of the economy: industry, free zones and commerce, especially electronic. 

“The analysis of the net tax flow carried out incorporates: the elimination of US$350 million in taxes and the multiplier effect of additional investments (with a 25% tax credit). The result is a present value of $195 million. If you add the possibilities of generating tax revenue that "E-commerce" can produce, which reaches US$1,088 million, the net tax flow increases," the document emphasizes. 

Additionally, the study, which was presented by Nazir, warns that economic policy measures such as the increase in tax rates, can reduce the contribution of ICT to the growth of other economic sectors and the national economy, registering a stagnation of the contribution of the selective consumption tax on the total for this concept.

“In short, since the communication sector is the second in the capacity to multiply the expansion of production of final goods and services, fifth in the capacity to expand the production of intermediate goods, its expansion can broaden the tax base in other sectors. . Simultaneously, stimulate higher collections than the amount of exonerations proposed”, indicates another of the conclusions. 

The study establishes that taxes on the consumption of mobile services reduce affordability, expand the digital divide and discourage investment by operators, especially in the areas of infrastructure and services, seeing their capital reduced after paying their tax liabilities. 

At the end of the presentation of the results of the study, the panel "Promoting ICT Development: A Macroeconomic, Market and Tax Approach" was held, in which Nelson Arroyo, president of the Indotel Board of Directors; Vivian Peña Izquierdo, President of the ICT Committee of the American Chamber of Commerce of the Dominican Republic (AMCHAMDR); Armando Manzueta, director of Digital Transformation of the MEPyD, and the authors of the study Alberto Veloz and Shajira Nazir, with the moderation of Manuel Mendoza, general coordinator of ONTIC.

Manzueta, affirmed that the study represents a first step to understand the problems that exist with the tax issue and its incidence directly, not only in the ICT sector, but also in the digital economy. While Veloz, author of the study, stated that a second investigation could focus on the investment plan scheme to ensure profitability for the providers in a reasonable period of time, which increases the possibilities of business in the provinces that do not They have full quality internet access.

While Peña Izquierdo valued the democratization of Internet access and how this could impact the development of electronic commerce. “There are no borders with access to quality internet service,” she said.

Social impact

The report specifies that the reduction of low-end telephone and computer equipment would bring social benefits such as an increase in affordability through the integration of low-income families into virtual educational programs; improvement in distribution logistics for Mipymes and would allow monitoring of risk factors in public health, while reducing the weight of communications spending for lower-income families. 

According to the recommendations of the United Nations Broadband Commission, cited in the study, the cost of Internet access should not exceed 5% of an individual's monthly income and, according to the analysis carried out by the GSMA, a world organization of mobile operators and related companies, the cost of acquiring a mobile phone and a 1GB monthly data plan in the Dominican Republic exceeds said percentage for all income groups. 

It specifies that the billing of communications services includes three types of taxes: Transfer of Goods and Services (ITBIS 18%), Selective Consumption (ISC 10%) and tax for the development of communications (IDC 2%), "in In other words, a RD$100 prepaid card leaves the user RD$70 to purchase minutes and data”.  

The ONTIC-RD is a center for information management, research and monitoring of the information technology sector, communications and its environment, which seeks to influence public policies and improve productive activity. It is the result of a strategic alliance between INTEC and the Dominican Institute of Telecommunications (INDOTEL). 

If you wish to consult the complete analysis, you can access the document on the official ONTIC portal: https://ontic.org.do/