A bill passed by the Senate passed Wednesday, July 9, can be seen as both good and bad for pay television. Good because pay-TV distributors can pay municipal service tax (ISS) instead of state sales tax (ICMS), which means substantial savings. Bad because they have to go to court to win that right. And worse still because what should have been stated clearly and unambiguously has been left vague in the text of the law.
The bill (PL 161/89), originally sponsored by Fernando Henrique Cardoso, was amply amended during passage through Congress. The rapporteur in the upper house was Sen. Romero Jucá (PMDB, Roraima). It now awaits the presidential signature to become law.
The new law will extend the list of services subject to ISS tax at around 5% in most cities, instead of ICMS at widely varying rates. Pay-TV distributors currently pay ICMS at a special low rate of 10.5%.
The relevant clause is 12.16, which lists the services subject to ISS. The clause originally read as follows:
?12.16 ? Exhibition of motion pictures, interviews, musicals, shows, concerts, fashion parades, sporting contests, quizzes and the like, for television sets, microcomputers, electronic appliances or the like, when the service is transmitted by whatever process and delivered interactively or by the end-user?s prior choice of programming.?
The rapporteur amended this to read as follows:
?12.16 ? Exhibition of motion pictures, interviews, musicals, shows, concerts, fashion parades, sporting contests, quizzes and the like.?
In other words, the crucial words specifying the type of service were left out in the text of the bill as passed by Congress.
Pay-TV companies can still seek judicial review to prove the law applies to them so they can pay ISS instead of ICMS, as the law doesn?t explicitly say. The door is open to counsel who feel up to taking state governments to court.