ISSC – Imposto Sobre Serviços de Comunicação
That Brazil has a high number of taxes is no secret for anyone. But there used to be more of them in the past years. ISSC is an example of tax that was extinguished when the ICMS was created, almost thirty years ago.
Telecommunications since '60s
The first measure in order to have an organized development of the telecommunications sector happened in the decade of 1960. Until then, it was responsibility of the Union, the states and the municipalities to explore the services of telecommunication and determine the fixed tariffs. There were approximately 1.200 telephone companies in Brazil, most of them small and medium enterprises, without any coordination or compromise to establish common conducts to develop the sector. This represented a big obstacle to its increase.
The telephonic services were concentrated in the central-east region of the country, which was controlled by the CTB (Companhia Telefônica Brasileira or Brazilian Telephonic Company). The interurban services were precarious and expensive.
Considering this, the government and the congress rectified the Código Brasileiro de Telecomunicações (Brazilian Code of Telecommunications) in 1962, creating some institutions to provide better services in the sector. That was when the FNT was created.
But what is FNT?
FNT is the Fundo Nacional de Telecomunicações (National Telecommunications Fund), created to provide capital for launching EMBRATEL (the company responsible for interconnecting all the cities from all the states in Brazil) in 1965. FNT charges were up to 30% of the cost of interurban and international calls.
FNT became ISSC (Imposto Sobre Serviços de Comunicação) in December, 1984. When the current Constitution was established, in 1988, it was clear that there was an attempt to increase the federative autonomy of the states, providing a fiscal decentralization. That was when ISSC and some other taxes were gathered in only one tax: the ICMS.
The Constitution and ICMS
In Brazil's 1988 Constitution, is was established that the states and the Distrito Federal (Federal District) would be the responsible for creating and modifying some of the taxes that Brazilians must pay. Each state would have the autonomy to establish it's own rules for the taxes, respecting the federal laws.
One of these taxes refers to the operations of movement of goods and service provision of interstate and intermunicipal transports and of communication. It applies even if the operations started abroad. It's the famous ICMS.
ICMS, which stands for Imposto sobre Circulação de Mercadorias e Serviços (or Tax on Circulation of Goods and Services), was created in 1988 to unify different taxes on different products and services. The taxes substituted were the following:
- ICM (Imposto sobre Circulação de Mercadorias), which was the tax for goods;
- IEE (Imposto sobre Energia Elétrica), the electric energy tax created in the 1946's Constitution;
- IULCLG (Imposto Único sobre Lubrificantes e Combustíveis Líquidos e Gasosos), a tax on lubricants and liquid and gas fuels, created in 1966;
- IUM (Imposto Único sobre Minerais), a tax on minerals, created in 1964;
- ISTR (Imposto Sobre Serviços de Transporte), a tax on transportation;
- ISSC (Imposto Sobre Serviços de Comunicação), the communication tax.
ICMS is the successor of the IVC (Imposto sobre Vendas e Consignações or Tax on Sales and Consignments), which was the successor of the IVM (Imposto sobre Vendas de Mercadorias or Tax on Sales of Good), created in 1934.
IVC was considered an obsolete tax because it charged in a cumulative way. It was substituted by the ICM in 1965. The great different between both taxes was that while IVC was cumulative, ICM is not.
ICMS was created to put together all the goods that were subject to movement, subordinating them to a single rule that would be determined by each state. With its creation, the three federal taxes – on minerals, on lubricants and fuels, and on electric energy – started to be treated by the states.