Facing a tax reform, Brazil’s mining and oil sectors strategize to lessen the new selective tax’s impact.
This “sin tax” applies to goods seen as harmful, affecting even non-renewable resource extraction.
The proposed rates could reach 1% of the market value of these resources.
Mining companies aim to exempt exports from this tax, striving to keep Brazilian products, like iron ore, competitive on a global scale.
The oil and gas sectors seek reductions or complete exemptions from the tax.
Both industries argue against double taxation, noting their significant contributions through royalties and other charges.
The mining sector, for instance, paid R$3.4 billion in the first half of 2023 through the Financial Compensation for the Exploitation of Mineral Resources (CFEM).
A special working group within the Ministry of Finance will discuss the reform, incorporating feedback from sector representatives.
However, this follows industry demands for a say in the reform process.
Mining executives fear the tax could damage Brazil’s export market, potentially leading to legal challenges.
They are concerned about the tax rate and its application, which could deter investment in strategic minerals vital for the energy transition.
Oil & gas reps seek to mitigate selective tax impact, explore environmental projects for rate reduction justification.
They point out the tax’s contradiction, especially taxing natural gas used in power generation, which could indirectly raise electricity prices.
Key issues include the risk of double taxation, the vague definition of harmful goods, and the challenge of setting clear tax guidelines.
In short, industry leaders are preparing to discuss these issues with finance officials, highlighting the reform’s potential contradictions and complexities.