Digital taxes in LatAm

France has revived a propose of digital taxes in Mexico. Argentina, Uruguay, and Brazil are forward in this issue.

In Mexico, Deputy Alfonso Ramírez Cuéllar proposed the creation of a digital tax. The idea follows the example of France, which in July 2019 approved a tax reform that hits technology giants.

In 2018, Argentina, Uruguay, and Brazil advanced in this issue approving changes in their tax laws. Other countries in LatAm are taking similar steps.

An International background in digital taxes

Digital taxes have been on the international discussion table this year since January 2019, when the G20 proposed a roadmap to create a 3% tax for services provided by technology giants. France and the United Kingdom supported the initiative known as the GAFA tax.

The tax proposal arose because many technology giants operate in countries with low taxes, such as Luxembourg and Ireland, avoiding the fees that traditional companies must pay. However, European countries have not been able to reach an agreement.

In March 2019, the European Union rejected the GAFA tax due to opposition from Ireland and the Nordic countries. In the absence of consensus, some European nations have promoted their own tax reform, such as France, the United Kingdom, Italy, and Spain.

In Spain, the digital tax did not prosper. The Congress of Deputies rejected at the beginning of this year the initiative that was included in the law of General Budgets of 2019.

In July, French lawmakers approved a 3% tax for technology companies that generate revenues of more than 750 million euros.

With the approval of the GAFA tax, France takes the lead on charges on tech giants in Europe. The US government criticized France’s measure. The French government said it would keep the tax until there is a multilateral agreement to regulate the services of digital companies.

France revived the discussion in Mexico

In Mexico, the Democratic Revolution Party (PRD) proposed in 2018 an initiative to tax technology companies that provide services in the country, but it did not prosper. France’s position helped revive the discussion in the Mexican legislature, although Morena (the ruling party in Mexico) promised not to create new taxes.

Ramirez Cuellar, who chairs the Budget Committee of the Chamber of Deputies, said that it is not a new tax, but “a tax reform.”

“The proposal is aimed at having foreign residents who provide their services in national territory pay taxes for all the income they receive from Mexican consumers so that no new tax would be established, nor would the rate of any tax be increased.”, Said Ramírez Cuéllar.

Morena’s lawmakers will present the initiative at the next legislature, which begins in September. Mexican lawmakers will have the challenge of writing a bill that does not affect consumers. The international landscape will add a higher degree of difficulty in the reform. Lawmakers will need to avoid Trump’s anger.

Taxes on the digital economy in Latin America

The Economic Commission for Latin America and the Caribbean estimates that Latin America could raise to $ 580 million with taxes on the digital economy.

Argentina, Brazil, Colombia, and Uruguay have already incorporated the digital economy into their tax legislation, while Ecuador and Chile discuss reforms in the bill.

In the case of Argentina, Uber participated in the legislative reform that approved value-added taxes (VAT) for services provided by foreign companies. The transportation platform proposed that the payment provider be responsible for withholding and collecting taxes. This idea could be resumed in Mexico.

In Uruguay and some municipalities in Brazil, the legislation included in services taxes the rental of services such as direct television transmission or streaming audio and movies.

The big picture indicates that taxes on the digital economy will soon be a reality in most of the world.