What is the new “agro-tax” in the Brazilian state of Goiás and will it set a precedent in the country?

In the second round, the Legislative Assembly of Goiás (Alego) approved two bills that created a new tax on agricultural production in the state. According to the proposal, the resources will be destined for a fund for infrastructure development.

The executive proposed the measure, headed by governor Ronaldo Caiado (União Brasil, center-right), who must now sanction the text approved in the Legislative.

After Goiás, the debate has also recently reached Paraná, where a similar measure was presented by the team of governor Ratinho Junior (PSD).

With the contribution, Goiás expects to collect R$1 billion (US$180 million) annually.

In the state, the law goes into effect in January 2023. In Paraná, the matter had not yet been voted on by the end of Friday the 25th, amid pressure against the project that managed to take it off the voting agenda.

HOW MUCH WILL BE CHARGED IN GOIÁS?

The proposals in Goiás and Paraná have been called the “agribusiness tax”, although there are specificities about the taxation model in this case.

In Goiás, the tax created is a social contribution, and the resources collected have a specific purpose – in these cases, for infrastructure.

This is different from the use that can be given to a tax (such as the ICMS, the state-level VAT), which goes into the state’s cash flow and can be spent on whatever expenses or investments the government wants.

In the case of Goiás, two bills were approved: one that authorizes a new social contribution on the part of agricultural production and another that creates the State Infrastructure Fund (called Fundeinfra), to which these new resources will be directed.

The tax in Goiás will be levied as follows:

• With a rate of up to 1.65% on agricultural products;
• The contribution will only have to be paid by those who already have tax benefits or special tax regimes;
• Even in this case, producers of essentialsic food basket items and milk are exempt, as well as family farmers who sell directly to the final consumer.

Similar formats already exist in Mato Grosso, and Mato Grosso do Sul, a point used by the Caiado government to defend the proposal.

Amidst the opposition of the state’s producers to the project, the Goiás government affirms that the objective is to invest in the state’s infrastructure and that it is necessary to repair part of the losses with ICMS exoneration, used this year to cheapen fuels and energy.

In Paraná, the idea is also to use the new resources to create the Fund for Development of Logistics Infrastructure of the State of Paraná (FDI-PR), with activities directed to works such as road repairs.

The government sent the text to the Legislative Assembly of Paraná (Alep) on Monday, November 21.

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