Technology

SIM card tax break for M2M services dramatically boosts IoT adoption rate

SIM card tax break for M2M services dramatically boosts IoT adoption rate
Yareah Magazine

Less than a year after the Brazilian government introduced an 80% reduction in SIM activation and operation taxes for M2M-only devices, a dramatic boost in implementation is apparent according to a new research note from TechPolis.

“This has clear implications for those other countries in Latin America and elsewhere which also have taxes tailored to services from the pre-IoT era and which are hindering the mass take-up of M2M,” notes the report’s author Marc Schryer. He is a Director with TechPolis, which provides international consulting services to leading players in the mobile technologies sector and has particular expertise in the developing world.

Because the tax break is only for certain types of M2M transactions, which Brazilian telecoms regulator Anatel defines as those not having a human component, it is easy to see a clear quantitative distinction between the take-up rate for exempt and non-exempt devices—particularly as the most widely-used M2M application, accounting for nearly half of all Brazil’s M2M connections, is Point of Sale (PoS). Because there is a human component in a hand swiping a credit or debit card at a PoS terminal, this type of transaction is not tax exempt.

Looking at figures from different regions, the average monthly state growth for M2M connections covered by the tax break has been 17% since it was introduced, whereas there has been an average 1.7% monthly reduction per state for non-exempt connections since then. According to figures from Anatel, M2M connections eligible for the tax break have grown by 988% from 161,000 to 1.76 million connections over the past year.

Brazil is already the fourth largest country in the world in terms of M2M connections and the largest by far in Latin America accounting for 71% of connections by itself. But the potential for growth has hardly been scratched according to Schryer.

“The Internet of Things represents a unique opportunity to foster economic growth by boosting productivity in key economic sectors – for mobile operators
car manufacturers, utilities, health institutions, agro-industries, mining enterprises and many other sectors of Latin American economies,” he says but goes on to point out taxation policies are slowing don the adoption of M2M services overall and in key verticals such as connected cars and smart grids.

Even in Brazil, the momentum could be slowed if the SIM card tax break is not applied to all M2M applications, and uncertainty removed from which services qualify and which do not.

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