Brazilian Government Approves Telecom Tax Breaks

The Brazilian government has approved over BRL 15 billion (US $6.6 billion) in federal tax breaks for mobile telecom and broadband infrastructure projects. The program will grant tax breaks to 13 types of broadband networks, with a particular focus on projects aimed at expanding or improving fiber-optic and mobile networks. So far, 20 companies have submitted 1,400 proposals for projects. The goal of this initiative is to substantially increase access to the internet and internet speed, which have consistently lagged behind government targets.

While we have criticized the Brazilian government’s uneven and Byzantine taxation and regulation approach in the past, this newest initiative appears to be an important step in the right direction. Telecom infrastructure is the lifeblood of a 21st-century economy—creating avenues to instantly share information, opening new trade opportunities and fostering growth for both cottage industries and  global enterprises—but it is extremely expensive to both build and maintain. These expenses are amplified in isolated rural communities, which are precisely where this type of instantaneous connectivity could have the greatest impact.

Much of Brazil’s sizable population is scattered across remote areas and is hungry for the promised opportunities and lifestyles of a modern economy. To realize this promise, the country will need a vibrant and reliable telecom industry. These tax initiatives should be viewed as only the beginning. Many local and municipal governments still impose their own hefty taxes on broadband cables, and the regulator Anatel’s mobile spectrum auctions (see Regional Developments) appear aimed at gouging operators for as much up-front payment as possible rather than encouraging the expansion and strengthening of mobile networks. If Brazil’s leaders can reduce these headwinds to infrastructure investment, we expect that any immediate losses will be offset several times over by growth—in the telecom sector and in the economy as a whole.

The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues:  http://www.tarifica.com/TarificaAlert.aspx