Brazil: To curb inflation, government zeroes import tax on food

RIO DE JANEIRO, BRAZIL – On May 11, the Brazilian federal government announced it would zero the import tax rate on seven categories of food products. The decision was taken by the Executive Management Committee of the Foreign Trade Chamber (Gecex/Camex) of the Economy Ministry.

In a press conference to detail the measures, the ministry’s executive secretary, Marcelo Guaranys, said that the measure aims to contain the advance of inflation in the country.

“We know that these measures do not reverse inflation but increase the contestability of the markets. So, the product that is starting to grow a lot in price, in the face of the greater possibility of importation, business people will think twice before increasing the product so much. That is our logic with this instrument”.

In April, the National Wide Consumer Price Index (IPCA), which measures the official inflation, closed at 1.06%. It was the highest index for April since 1996 (1.26%). According to the Brazilian Institute of Geography and Statistics (IBGE), which calculates the IPCA, the accumulated inflation over 12 months is 12.13%.

According to the Foreign Trade Chamber secretary, Ana Paula Repezza, the tax reduction is effective as of May 12 and will be valid until December 31 of this year.

The food products that had the importation aliquots zeroed are:

• boneless beef, frozen (tax was 10.8%);
• pieces of offal, edible from chicken/chicken, frozen (tax was 9%);
• wheat flour (tax was 10.8%);
• other wheat and mixtures of wheat with rye, except for sowing (tax was 9%);
• cookies, with added sweetener (tax was 16.2%);
• other products of bakery, pastry, cookie industry, etc. (tax was 16.2%);
• corn grain, except for sowing (tax was 7.2%).

The Ministry of Economy informed that the impact of the tax waiver might reach R$700 million (US$136 million) by the end of the year. There is no need for tax compensation because it is a regulatory tax, not a revenue tax.

“The import tax has a function that is not tax collection; it regulates the market. The reason behind is market regulation, either for one side or the other,” explained the deputy executive secretary of Camex, Leonardo Diniz Lahud.

OTHER REDUCTIONS

Besides zeroing the import rate for food products, Camex also reduced or zeroed the tax on other imported products. Two of them are inputs used in agricultural production.

Sulfuric acid used in the fertilizer chain had its 3.6% tax rate zeroed. As for mancozeb, a type of fungicide, the tax was reduced from 12.6% to 4%.

The taxes on two types of steel rebar were also reduced in response to a request from the civil construction sector, which was already under analysis by the Ministry of Economy. These rebars, which had an import tax of 10.8%, will now pay 4%.

“The most important characteristic of these requests, which differentiate them from the food-related requests, is that the ministry had technically analyzed this request for at least eight months,” said Ana Paula Repezza about reducing the import tariff on steel rebar.

With information from Agência Brasil