Nearshore Americas
El Salvador tech tax

El Salvador’s Latest Economic Gamble: Abolishing Taxes on Tech

El Salvador will abolish all taxes on technology services and the manufacture of ICT goods, as the country’s President Nayib Bukele embarks on yet another daring goal to turn the economy around.

“Next week, I’ll be sending a bill to congress to eliminate all taxes (income, property, capital gains and import tariffs) on technology innovations,” the President tweeted.

Analysts expect that growth in El Salvador’s tech industry will attract a considerable amount of foreign investment, creating jobs for young people. Much of the country’s youth finds itself caught in the corssfire of police and criminal gangs who smuggle drugs to North America.

Experts view Bukele’s statement with skepticism, considering that the Salvadoran President has garnered a reputation for ambitious announcements.

Under his leadership, El Salvador became the first country in the world to accept bitcoin as a legal tender. His love for crypto was so great that he even built the world’s first Bitcoin City.

However, the gamble backfired as bitcoin saw a large chunk of its value wiped off in recent months.

Scrapping tech taxes is, nevertheless, expected to benefit companies in El Salvador, even if the move fails to turn the country into a Central American tech hub.

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The biggest winner could be Japanese electronic manufacturer Kyocera, which operates a large manufacturing facility in the city of San Bartolo. The plant exported more than US$259 million worth of goods last year, according to the Central Reserve Bank (CRB).

The technology industry, including manufacturing and services, employs more than 18,000 people in El Salvador. The export of IT-enabled services generated US$74 million in revenue in 2019.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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