In an effort to strengthen the nation’s technology industry and draw more investment, El Salvador’s President Nayib Bukele recently unveiled a new measure that would completely erase all taxes on technological innovations. The action could encourage more development and implementation of blockchain technology in El Salvador, including digital currencies like Bitcoin.
Next week, I’ll be sending a bill to congress to eliminate all taxes (income, property, capital gains and import tariffs) on technology innovations, such as software programming, coding, apps and AI development; as well as computing and communications hardware manufacturing.
— Nayib Bukele (@nayibbukele) March 24, 2023
The tax exemption that has been suggested would apply to income, property, capital gains, and import duties on cutting-edge technologies, including software development, coding, applications, and artificial intelligence. Manufacturing hardware for computers and telecommunication systems would also fall under it.
This tax-free environment could encourage businesspeople and developers to devote more of their time and money to creating innovative blockchain and cryptocurrency applications. Additionally, it may encourage additional investment in the cryptocurrency sector as investors look for countries with advantageous tax laws.
Concerns have been raised regarding this proposal’s possible downsides, though. Without the deterrent of taxes, bad actors would be more inclined to take advantage of cryptocurrencies for money laundering, tax evasion, or other unlawful acts, which might make it simpler for criminals to use them for their illicit operations.
Despite these reservations, players in the technology sector have responded favorably to Bukele’s plan, with many applauding the initiative as a key step toward fostering a more innovative environment in El Salvador.
#Binance built an Customer Support Center in El Salvador from last year with about 60 staff already. Let's do more! https://t.co/7nQXdmhnrJ
— CZ 🔶 Binance (@cz_binance) March 24, 2023
Bukele has been a strong supporter of digital transformation and has worked to encourage the adoption of new technology in a variety of economic areas. He has previously stated his intentions to establish the first “Bitcoin city” and to make Bitcoin legal money in El Salvador.
#ElSalvador is making MAJOR moves to become a fintech hub in Latin America similarly to Singapore in Asia 😁🇸🇻
With their welcoming crypto stance, I look forward to building there one day! 🫡
Here are some beautiful views of the beach from visiting my in-laws last summer 🌊😎 https://t.co/2SuK0DuhOE pic.twitter.com/6JevHFO4HF
— C2B Solutions (@c2bsolution) March 24, 2023
The planned tax reductions are anticipated to help start-ups, small enterprises, as well as established corporations wishing to increase their operations in El Salvador. The action may also attract international investment in the nation’s IT sector, as foreign capital prefers to locate in countries with advantageous tax laws.
In conclusion, El Salvador’s plan to do away with all taxes on technological advancements may greatly influence the development of the nation’s tech industry and the uptake of blockchain technology, including cryptocurrencies like bitcoin.
The idea may have certain downsides, but the advantages of a tax-free environment for technological innovation may inspire more investment in the field, fostering El Salvador’s economic development and prosperity.
