Congressman Júlio Semeghini (PSDB, São Paulo) has presented an amendment to the tax reform bill (PEC 41/2003) in response to pressure from ABETEL, the national association of telecommunications tax research, which wants ICMS sales tax rates to be set ?in accordance with the essentiality of services?. The idea is distinguish between services considered essential and those deemed to be superfluous or luxuries.
The main impact for telecoms would be to lower the monthly cost of a fixed line to consumers. If the amendment were adopted, the tax rate on this subscription charge would be as low as the rates for other services considered essential. Deputy Semeghini?s amendment proposes similar exceptions for basic building materials and electricity (up to 100 kWh per month consumed by homes).
The Government?s tax reform bill stipulates special low ICMS rates only for staple food products.
Conflict
State governments, which collect ICMS tax, will certainly oppose the amendment supported by ABETEL. Their main sources of tax revenue are telecoms, power and fuel. If the rate for telecoms is reduced, rates on other services will have to be raised to compensate. It will be very hard to persuade the states to agree to that sort of trade-off.
Pay television is one of the sectors that could be significantly affected. Pay TV currently enjoys a special rate and will probably end up classified as telecoms when the reform goes through. It may incur a higher rate as a result. The debate can only be complicated for pay-TV operators by the pressure from ABETEL to classify telecoms as an essential service.
