Brazil government considers lowering taxes to boost industry – Economy Minister

RIO DE JANEIRO, BRAZIL – The federal government is considering a 25% cut in the Tax on Industrialized Products (IPI), a federal duty levied on industrialized goods, whether domestic or imported, for sale in the country.

According to Minister of Economy Paulo Guedes, the goal is to boost economic activity, by lowering costs that the productive sector eventually passes on to the end consumer.

“We will reindustrialize the country,” Guedes said yesterday February 22, when taking part in an event sponsored by BTG Pactual bank in São Paulo. “We are preparing a measure with the support of Chamber president Arthur Lira, Chief of Staff Ciro Nogueira, and, mainly, President Jair Bolsonaro,” the Minister added, while once again arguing the importance of a tax cut in Brazil.

“Note that agribusiness is soaring because there is no tax on agricultural products, the IPA. The Brazilian industry has been suffering for the last three, four decades from high taxes, high interest rates, and excessive labor charges. We must address these three issues, and we are going to make a first move now, by cutting 25% of the IPI. It is a measure to reindustrialize Brazil,” he stated.

“Since tax collection has risen strongly, we have the resources we were going to invest in the Tax Reform that stalled in the Senate, the Executive can say that the collection surplus is not intended to swell the [public] machine again and that we prefer to transfer this collection surplus in the form of a tax reduction for millions of Brazilians, for everyone,” the Minister said, guaranteeing that the measure will be forwarded along with other government proposals.

FGTS

Also during the event, Guedes again advocated to allow indebted workers to withdraw part of their resources from the Length of Service Guarantee Fund (FGTS) to settle commitments. According to the Minister, the government may propose this measure “between now and the end of the year to help the economy grow.”

“We can use FGTS resources because they are private funds; people who have funds there and are struggling. Sometimes, people owe money to banks and are creditors in the fund, but they can’t withdraw [the money] and pay off their debt,” he explained.

PRIVATIZATIONS

The Minister of Economy also argued that a portion of financial resources stemming from the sale of state-run companies and public service concessions be put towards initiatives to fight inequality, like the Fund for the Combat and Eradication of Poverty. This should strengthen people’s support for privatizations, serving as a “boost for the political class to expedite privatizations,” he said.

“Today, privatization becomes debt reduction, which is a very indirect mechanism. It is necessary to explain to politicians that privatization can cheapen the rolling over of public debt, creating more resources available for Health and Education in the following year’s budget. This is very indirect. If we sell a state-controlled company and we take 20% or 30% of the debt reduction and direct it towards the Fund for the Eradication of Poverty, it’s a transfer of wealth,” he said. “There might be an increase in popular support for privatizations.”