El Salvador was the first country to make Bitcoin legal tender and pushed for further adoption.
The popular crypto-friendly country El Salvador has taken a big step in improving economic growth through technology. It recently revised its tax system by exempting technological innovations to drive developments. This latest move is expected to attract more developers to the country, as it has become a tax haven for them.
El Salvador Offers Tax Exemptions for Tech Developers
President Nayib Bukele sent the bill to Congress on April 1. El Salvador’s tax exemption covers developers in artificial intelligence development and coding applications, software programming, communications, and computing hardware manufacturing. It removes all import duties, income capital gains, and property taxes from these sectors.
The law aims to make El Salvador the leader in advanced technology manufacturing in Latin America. Likewise, the president aims to encourage, diversify and expand Salvadoran human talent toward the manufacture of technology. He also wants to boost education and training in advanced technological manufacturing.
The president established a National Bitcoin Office (ONBTC) to support this recent move. The regulatory body will work hand in hand with Bitcoin companies and businessmen in the country.
ONBTC announced via Twitter that it would help position El Salvador as a global technological and economic power. In particular, President Bukele had promised to continue with this decision on March 24. He made the announcement on Twitter, leading to positive results as many users saw it as a step to boost the country’s tech industry.
Reactions to New Bill Announcement: “Unfair Competition”
Despite the fact that the announcement aroused interest in the population, the measure may not be entirely fair for companies in other sectors that do pay taxes in the country, as well as it may not have the expected impact.
According to the economist Rafael Lemus, it is necessary to know the content of the bill and verify if the measure includes Salvadoran companies in the field that, before these incentives, had already been consolidated in the country or if it is aimed only at the new companies that emerge.
Senior economist of the Central American Institute for Fiscal Studies (ICEFI), Ricardo Castaneda, points out that “if the State allows certain sectors not to pay taxes, it will imply that others do, which includes the entire population and that results in unfair competition for Salvadoran companies”.
In this sense, Castaneda points out that the country should advance and develop in this area through other mechanisms that could boost the growth of this industry in the future. country, such as funds earmarked for innovation.
El Salvador’s Economic Development Skyrocketed Following BTC Legalization
In November 2021, the country inaugurated a $1 billion BTC bond-backed Bitcoin city to be a home for “all things Bitcoin”. After legalizing BTC, tourism from El Salvador skyrocketed by 30%. El Salvador saw a boost in its exports, since it grew by 13% in January 2022, beyond the 10.3% registered in January 2021.
By Audy Castaneda
