MEF: Applying VAT to streaming platforms will not necessarily increase prices

The Ministry of Economy and Finance (MEF) stated a few days ago that the application of the IGV to the streaming platformslike Netflix and Spotify, This will not necessarily be reflected in an increase in the prices of services for end users.

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“The implementation of this VAT collection mechanism will not necessarily increase the price paid by end users. The experience of Latin American countries where VAT collection on digital services has been implemented shows that the increase in prices for such services has been minor and insignificant,” he said.

He said that in other service intermediation services such as Airbnb, Uber or Amazon, for example, the effect would be very limited since the VAT that will be collected is not on the total price of the service, but only on the commissions charged by the companies.

“In the case of streaming companies such as Netflix or Spotify, the final price will depend on whether the companies decide to pass on the entire tax to consumers, which would not necessarily happen,” he said.

He indicated that in countries such as Colombia, which levies Value Added Tax (VAT) on these services, no significant effect was observed on Netflix rates, for example, and these are currently even lower than those in Peru, despite the fact that its VAT rate is higher (19%).

“It will depend on the platform’s decision, the competition they face, the segment they provide services to, among others,” he noted.

It applies in other countries

The ministry said that taxes on digital services are already being levied in other countries.

“Payment of taxes on digital services is already applied in other countries. The countries of the European Union have implemented mechanisms for collecting VAT/IGV applicable to digital services since 2015,” he said.

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