A governmental decree will soon change tax collection and reduce import tariffs

The Federal Government is ready to issue a presidential decree to change tax collection mechanisms in Brazil. Thus, the government’s economic team argues that it will lead to a 1.5 percentage point reduction in the rates levied on all imported products.

According to the Ministry of Economy, the idea is to eliminate foreman services from the tax calculation basis. In the port sector, foreman services entail cargo loading and unloading in port terminals.

Nowadays, the rates taxed on imported items are levied considering foreman services. Governmental sources say that Brazil is one of the few countries in the world to adopt this practice and that not even other Mercosur member countries, including Argentina, do such a thing.

The decree altering the current tax collection mechanism in Brazil has already been approved by key ministries and the republic’s legal team. The Brazilian Attorney General (AGU) is conducting a final analysis of the decree to avoid any potential for illegality in light of the upcoming elections. The decree will be sent to President Jair Bolsonaro for signature after it has passed all of the necessary checks.

The Ministry of Economy hopes that importers will pay 10% when entering the country. Mercosur’s External Common Tariff is currently at 11.6%. Thus, if approved, the reduction would lead to a 1.5 percentage point cut.

The authorities have already dubbed this measure the “this round,” referring to Brazil’s tariff reductions. Last year, rates were reduced by 10% across the board, covering roughly 87% of all products imported. The Brazilian government recently announced another 10% tariff reduction, affecting 6,195 customs codes. Both measures, however, are temporary and require the approval of other Mercosur partners to become permanent.

On the other hand, eliminating foreman services from the tax calculation basis will be a permanent change until further notice, signaling an important change in the composition of the customs value that composes the basis for calculating the tariff, with a similar effect to a rate cut.

Such alteration is an old claim of the private sector spearheaded by the National Confederation Industry (CNI). The government prefers not to call it a “tax waiver” as it deems import rates to be of a mandatory, regulatory nature. Per law, that tax category does not allow for a tax waiver.

According to the ministry, the estimated revenue loss will be R$ 461.3 million in 2022 but will decrease more in subsequent years. On the other hand, the economic team considers this value insignificant in comparison to the act’s reduction in “Brazil cost” and increase in competitiveness.

Source: Valor Econômico

To read the full original article, please go to:

https://valor.globo.com/brasil/noticia/2022/05/27/decreto-muda-cobranca-e-reduz-tarifa-de-importacao.ghtml

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