Brazil government announces over US$10 billion in tax cuts -Sindifisco

RIO DE JANEIRO, BRAZIL – In the first quarter of this year, the federal government announced tax cuts totaling R$47.05 billion (US$10 billion). This is according to a survey conducted by Sindifisco Nacional, an association of tax inspectors of the Internal Revenue Service.

The list of products subject to import tax reductions or exemptions is long, ranging from IPI and VAT rates and jet skis to staples such as roasted coffee, margarine, and sugar.

Tax cuts announced by the federal government in 2022:

• R$20 billion: 25% reduction in IPI rates (tax on industrial products), except for cigarettes. States and municipalities lose R$10 billion, receiving part of tax revenues through transfers;
• R$16.6 billion: Reduce PIS and Cofins tax rates (Brazilian VAT) on diesel, biodiesel, cooking gas, and aviation fuel to zero – estimate could reach R$20 billion in funds from credits generated in this process;
• R$8 billion: Extension of payroll tax exemption for 17 sectors until 2023.
• R$1 billion: Reduce import duties on six items in the basic food basket – roasted coffee, margarine, cheese, pasta, sugar, and soybean oil – and on ethanol to zero; in addition to a 10% reduction for computers and capital goods;
• R$756 million: Reduce airline income tax rate on aircraft leases to zero by 2023;
• R$500 million: Reduction in income tax (IR) for foreign investors;
• R$150 million: Extension of exemption from industrial products tax (IPI) for cab drivers and persons with disabilities (PCDs) in the purchase of new cars until 2026.
• R$50 million: Reduction of the import tax rate on jet skis, balloons, and airships to zero.

WHAT IS IPI?

IPI is one of the most common taxes in Brazil, being the seventh tax that generates more revenue for the Brazilian government.

Short for ‘Imposto sobre Produtos Industrializados’, which is Portuguese for Tax on Industrialized Products, IPI is a federal tax that is applied to all national and foreign products that have been modified in some industrialized way for consumption or use.

Overall, IPI is paid by all of those who own industries and by those who import industrialized goods to Brazil. The basis for the IPI tax calculation is the retail sales price for national products and the sales price plus the addition of the import duty and other import fees for all imports.

IPI is generally used as an incentive or as a hindrance to the consumption of some goods. For example, in order to encourage the acquisition of vehicles, the IPI levied on cars has been lowered by the government until December 2014, as was the IPI levied on electrical appliances between 2012 and 2013.

On the contrary, the IPI on tobacco products has been raised to 300% in order to hinder consumption.