Bolsonaro vetos CONDECINE tax waiver for streaming film industry

RIO DE JANEIRO, BRAZIL – President Jair Bolsonaro on Tuesday, June 15, in a ceremony at the Planalto Palace, partially sanctioned Provisional Measure (MP) 1018/2020, which reduces the tax burden on satellite broadband internet service provided through small antennas. The bill had been passed by the National Congress in late May.

Following guidance from the Ministry of Economy, the president decided to veto the provisions establishing tax waivers related to the Contribution for the Development of the National Film Industry (CONDECINE).

This tax exemption was not included in the MP’s original version presented by the federal government, and was included by Congress during the processing of the measure.

According to the text, streaming service platforms such as Netflix, Amazon Prime Video, and Disney Club, would be exempt from paying CONDECINE, a tax levied on the audiovisual sector (cinema, broadcast and cable TV, and “other markets”).

“Although the legislator’s intent is commendable, the provision would imply billions of revenue losses, beyond the amount originally estimated. This increase in tax waiver was not properly assessed by the Ministry of Economy, nor did it include compensatory measures, for which reason it was in violation of both the Fiscal Responsibility Law and the Budget Guidelines Law. Consequently, following the economic team’s suggestion, the president decided to veto these provisions,” said the General Secretariat of the Presidency of the Republic in a statement.

With the veto, the tax waiver that benefited streaming platforms is now ruled out.

The National Congress may overturn the presidential veto. In this case, an absolute majority of votes in the Chamber of Deputies and in the Senate is required, that is, 257 votes from the lower house and 41 votes from senators, counted separately. Unless the number is reached in the plenary session, the veto is maintained.

Changes

The law sanctioned by Bolsonaro reduces fees and taxes levied on small ground stations connected to satellite internet service, the so-called VSAT.

The reduced charges refer to the Installation Inspection Fee (TFI), the Operating Inspection Fee (TFF), the Contribution for the Promotion of Public Broadcasting (CFRP), and CONDECINE.

According to the text, these taxes will be the same as those charged for the Personal Mobile Telephony Service. With the change, this type of service is expected to be expanded in the country, which currently has 350,000 points.

The estimate is to reach 750,000 stations, which should mainly serve rural and peripheral areas, which do not have internet service through other technologies, such as fiber optics and urban telecommunications antennas.

According to the government, the revenue waiver estimated with these reductions had already been included in the Budget Law (PLOA) for 2021.

The MP text also includes in the General Telecommunications Law (Law 9472/97) the government’s obligation to create conditions for the expansion of connectivity and digital inclusion, prioritizing the coverage of public schools.

The law also determines that a broadcasting station must be installed in a place that meets the minimum coverage requirements of the municipality where it was granted, according to criteria established in the service’s technical standards.

In addition, installation will be allowed in another municipality, upon evaluation of a study to determine the technical or economic need for this installation in the proposed location and the fulfillment of the coverage criteria of the municipality where the concession was granted.

“This MP will represent the possibility of more content in development frontiers, greater flexibility in the broadcaster’s local management. It is important to take broadband to rural, needy, and peripheral regions,” said Minister of Communications Fabio Faria during the MP’s sanctioning ceremony.