Netflix and Amazon may be forced to pay new tax and invest in national content

A Senate bill (57/2018) that creates new rules for streaming platforms like Netflix and Amazon Prime Video entered a public hearing on Monday (7). The text establishes that the services must pay a contribution of up to 4% on the billing, respect a quota of national content and invest a percentage of the revenue in the production of Brazilian works.

Amazon Prime Video / Disclosure

Authored by Senator Humberto Costa (PT-PE), PLS 57/2018 is based on a proposal by Ancine (Agência Nacional do Cinema) that had the objective of “guaranteeing stability and legal security” to the Brazilian audiovisual market after the creation specific legislation to regulate video on demand (VOD) services.

The text states that video on demand providers, that is, services like Netflix, Amazon Prime Video and Hulu are required to offer Brazilian audiovisual content permanently in the catalog, at a percentage to be defined later by the Executive. Of these, half must come from independent national producers.

Tax of up to 4% targets on YouTube and Netflix

YouTube Premium

Companies are obliged to pay the Condecine (Contribution to the Development of the National Film Industry), at a rate that starts at 0% for companies with annual gross sales of up to R $ 3.6 million, up to 4% for the portion of revenue that exceeds R $ 70 million. This rule also applies to what is defined in the text as a “content sharing platform”, such as the YouTube.

Under the bill, media services will be able to obtain up to 30% discount on Condecine payment if they allocate funds for the acquisition of rights to works from production companies established in the North, Northeast and Midwest regions.

Regardless of the tax benefit, Netflix, AmazonPrime Video and other video-on-demand providers would be required to invest “annually a percentage of their gross revenue in the production or acquisition of licensing rights for Brazilian audiovisual works”. The investment requirement is progressive and has the same percentages as Condecine, reaching 4% for companies with annual sales exceeding R $ 70 million.

If the media platforms do not comply with the law, they can receive a fine of R $ 2 thousand to R $ 50 million for an infraction committed. The sanctions also include cancellation of the registration of the streaming service and “suspension of transfers of monetary resources between residents in Brazil and economic agents resident or domiciled abroad”.

Finally, the text establishes that the Executive Branch will regulate the law, “which will include the obligation to provide subtitling, descriptive subtitling, audio description and Brazilian Sign Language – Libras in audiovisual content”.

In justifying the project, Senator Humberto Costa points out that global companies, such as Netflix, Hulu and Vimeo, “are gaining market quickly and compete with other segments of audiovisual media, such as open television and subscription services, without being subject to comparable obligations ”.

National content quota hurts consumers, says Netflix

Netflix

The bill was debated at the Economic Affairs Committee (CAE) on Monday (7) in public hearing with members of the streaming, cinema and pay TV industry.

Netflix’s Director of Government Relations and Public Policy, Paula Pinha, says that the share of national content can harm consumers and does not produce the same effects as in the film and television sectors. “If one of the pillars of the project is to guarantee the presence of Brazilian content in this new market segment, the discussion of alternative measures to promote the activity would be the most appropriate way”, says Pinha.

The president of the Brazilian Cinema Congress, Rojer Garrido de Madruga, is in favor of the measure and points out that “it is much easier to simplify all the bureaucracy by charging on top of the billing”, citing that countries like Spain and Italy tax the activity of film companies. streaming at 5%.

The representative of the Motion Picture Association of America (MPAA), José Maurício Fittipaldi, says: “There is no data, there is no experience to show that this path is the best. The only data that exists about the European experience is from the same month in which the measure was implemented, and the report does not consider any effect of that directive. We are in a challenging scenario, within a context of economic crisis, where it is clear that this project is highly interventionist and excessive ”.

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