Brazil’s Economy Ministry prepares new decree to cut tax on 4,000 products

The government is preparing a new decree to reduce the Tax on Industrialized Products (IPI). The idea is to replace the previous cut, which the Federal Supreme Court (STF) questioned.

According to sources, the reduction will be 35% and apply to 4,000 products not manufactured in the Manaus Free Trade Zone.

The region manufactures home appliances, vehicles, motorcycles, bicycles, TVs, cell phones, air conditioners, and computers, among other products. Cigarettes should also be excluded from the tax reduction.

With the new decree, the Ministry of Economy wants to solve the legal and political imbroglio that started after the announcement of the first tax cut. In February, the government made a first reduction of 25% in the tax, valid for all products except cigarettes.

Representatives and politicians linked to the Manaus Free Trade Zone complained that, as the products made in the region are tax-free, there was a loss of competitiveness when reducing the tax in the rest of the country.

PREVIOUS DECREE

In April, the government increased the cut by another ten percentage points, leaving out additional products also made in the Free Trade Zone.

In May, however, Justice Alexandre de Moraes of the Federal Supreme Court (STF) suspended the second decree, following a request by the party Solidariedade.

The party argued that the reduction affects the region’s development and environmental preservation.

The decree signed by President Jair Bolsonaro, published on April 29, extended the cut in the federal tax from 25% to 35% with the argument that it was necessary to stimulate industry at a time of low growth.

Now, the evaluation in the Ministry of Economy is that a new text gives more legal security for the federal tax cut. The new decree should be published next week.

With information from Estadão