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November 26, 2014
Sunday, May 25, 2014

Advertising, a concern for TV channels

Cabinet Chief Jorge Capitanich says that media groups do not meet their tax obligations for an estimated amount of 340 million pesos.
By Mariano Parada López
For The Herald
Local media business complain that foreign networks air ads from abroad but do not pay taxes

Broadcast TV channels are claiming that they receive unequal treatment in comparison with foreign broadcasters. The president of ATA, the chamber that represents broadcast channels nationwide, spoke to the Herald about a number of regulations established in the new Media Law, claiming that it runs behind foreign broadcasting in terms of advertising, market share and property restrictions.
Heber Martínez, who is also Public Relations manager of Telefe, the Telefónica-owned Buenos Aires channel, said that “we are seeing that those big budgets (channels) are getting ahead in terms of advertising and audience.”

Although he was pleased by government policy toward national production encouragement, Martínez warned: “the media law made an effort to deconcentrate the media, but the advertising market is concentrated. Thirty private advertisers manage 70% of the total revenue.”

And how does this affect foreign networks? ATA is looking at this because they broadcast advertisements from abroad, and thus it suspects foreign networks, represented in Argentina by LAMAC, do not pay income tax as national channels have to, according to the law. “We should worry about the money that the state does not receive. We do not know whether foreign networks pay taxes for advertising or not,” Martínez pointed out.

According to a study carried out by ATA, foreign broadcasters transmitted almost 40 million seconds of advertising last year, which came to 450 million pesos in revenue, including income tax and fees for AFSCA watchdog and author chambers like SADAIC, in a conservative estimate. This amount was not allegedly paid to AFIP by foreign channels, ATA believes.

According to the law, TV channels have to pay 35% of gross advertising revenues in income tax, plus 5% to AFSCA and 4.27% to authors of content. It is estimated that, during 2013, 21 foreign channels earned 989 million pesos thanks to advertising. With a 24.75 pesos cost per second of advertising, on average, AFSCA media watchdog should have earned 42 million pesos, authors of content 49.49 million pesos and the state 346 million pesos in income taxes. The Herald talked with AFSCA sources, which confirmed the obligation of every channel to pay these taxes, unless they claimed “tax confidentiality” so as not to divulge the channels’ turnover.

This complaint recalls what happened with online travel agency Despegar.com, which was investigated for alleged tax evasion, as it was legally registered in Delaware, USA.

The Media Law, passed in 2009 and upheld by the Supreme Court last year, forces foreign channels to establish an office and a Buenos Aires City address in a special register, something that Martínez stressed they have not done: “If they want to be treated as nationals regarding their rights, I would like the same with their obligations. One of them is to have a CUIT number, another one is that they pay taxes here.”

In his most recent speech before the Senate on May 7, Cabinet Chief Jorge Capitanich announced that “media groups” do not meet their tax obligations for an estimated amount of “339.6 million pesos.” The kirchnerite official also complained about a “concentrated” private advertising market. According to tax expert José María Caruso, “what has to be analyzed is whether the revenue is from an Argentine source.” In this situation, it is highly important to pay attention to the contract between the channel and the cable provider. If the revenue source is Argentine — Caruso underlined — it will fall under article 93 of the Income Tax law.

According to that article, no matter where the company is settled, the tax has to be paid anyway. AFSCA underlined foreign networks’ obligation to pay. As the media watchdog said, “AFSCA and AFIP receive tax returns from TV licensees monthly, in which the tax base is stated.”

The Herald tried to contact a LAMAC spokesman for comment, but they were unable to speak publicly at this time.

Market share

ATA is also concerned about how foreign companies are conquering more market share, especially DirecTV. Subscription TV has an 80 percent market share, with some figures reaching almost 100% in southern provinces, as a report carried out by LAMAC stated.

In all homes with subscription TV, 76 percent of them have cable providers and 24 percent is by satellite. “DirecTV is making those channels massive, when one of the law’s aims was to encourage local content”, Martínez said. The satellite TV company reaches 100% of the country’s territory with just one license, and the channel grid is the same in the whole country. Meanwhile, cable companies have to adjust their grid to include local content in each area.

“In Mendoza province, DirecTV has 50 percent of the market share. When the local political campaign starts in 2015, half of the population will not see it,” Martínez underlined. Broadcast and news channels are forced to give free spaces for political advertising, according to Argentine law.

AFSCA denied there could be a privilege for DirecTV, which was recently purchased by AT&T. “DirecTV and the rest of providers are forced to include all compulsory TV channels according to the law.” they said.

In this situation, Martínez also complained about local channels difficulties to reach advertisers without proper market research: “It is easier to run an office in Buenos Aires and sell advertisements for the whole country, and difficult to sell in the provinces when they do not have ratings measurements. We are trying to give those channels an alternative information so that they can get advertisers.”

Martínez concluded: “What we want is clear rules.”

 

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