Porzio Ríos García

Taxes on the digital economy

About 40 years ago, when "new technologies" broke, Chile began to see color TVs, video players (the legendary VHS and Beta) and video game consoles. The State considered them a "luxury", establishing, at the beginning of the 1980s, an additional tax. Thus, for example, the purchase of color televisions was taxed with VAT and an additional 20% tax.

But when these "new technologies" became widespread and the unpopularity of the additional tax, in the late 1980s, it was decided to abolish it.

Through the press, we have learned that the project to simplify the tax reform would include taxes to digital services platforms via streaming. The options would be an additional tax to these services or, to be taxed with VAT, applying to the monthly values charged. In both cases, the users would pay them by credit cards, with the issuing financial institutions called to retain them and receive them in the tax coffers.

However, if the goal is to tax the profits generated by the use of these services, this would not be achieved with an additional tax or VAT, since its cost would be assumed by users in Chile, increasing its value.

In other jurisdictions, the issue is not peaceful either. Australia, Argentina, and Colombia chose an additional tax to incomes; countries of the European Union (EU) still debate the issue, agreeing preliminarily to apply a reduced rate (3%) to the income for these services. In addition, the EU evaluates to tax the profits of streaming companies in each country where they operate. The OECD also gave guidelines in this regard, without reaching an ultimate solution.

Perhaps it would be interesting if the bill in Chile explores other taxation alternatives if the idea is to tax the profits generated by the streaming services companies, as proposed by the EU when creating figures that do not raise the charges to users, through the effective taxation of the profits of these companies. Otherwise, in a few years what happened in the 1980s may occur and, soon after, abolish the new taxes to adjust them to the prevailing reality.