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Country Rankings - Brazil

  • Sep 13, 2017   Brazil: illogical

    Some things in the world of tax seem to never change however. Particularly governments' apparent fixation with tax amnesties. Brazil is the latest in a long list of jurisdictions that have announced an amnesty-related development of one sort or another recently. In Brazil's case, it has decided to extend the deadline for its latest disclosure scheme by one month to September 29. The success or otherwise of an amnesty is likely to depend hugely on its terms and conditions – too much stick and taxpayers might stay below the radar, too much carrot and the rule of law could be undermined. Still, I don't remember seeing too many headlines recently proclaiming that a disclosure scheme has been a roaring success. Indeed, the word "flop" is more readily used to describe the outcome of a tax amnesty. And notable flops have been reported in South Africa and India in the past few weeks. More of a problem seems to be the regularity with which tax amnesties are deployed. Numerous studies show that the more a government utilizes tax amnesties, the less likely those with undeclared income or assets will come forward as they hold out in hope of more favorable terms in subsequent schemes. This tends to undermine the tax compliance culture rather than enforce it, and it can be no coincidence that jurisdictions with high rates of non-compliance are in many cases frequent users of tax amnesties – Italy being a prime example. So, can it be concluded that the repeated use of tax amnesties is illogical? Perhaps. But then the human mind does remain susceptible to flawed thinking. Perhaps when the robots finally take over our jobs, there'll be no need for tax amnesties; they'll be logical and compliant. Won't they...?
    Source: https://www.tax-news.com/news/Brazil_Extends_Deadline_For_Tax_Amnesty____75182.html

  • Aug 15, 2017   Brazil: centralizing

    Brazil has received a lot attention recently, including here, for its extremely complex tax regime. And it received further unwelcome publicity in this regard recently, courtesy of the International Monetary Fund's latest "Article IV" report on the economy. The IMF isn't given to hyperbole in its rather soberly authored "Article IV" consultations, so its description of Brazil's indirect tax regime PIS/COFINS as "exceedingly complex" did jump off the page somewhat. As did its conclusion that companies in Brazil spend roughly a third of their resources on complying with the country's multi-layered tax system. When it comes to tackling tax complexity, many governments and political parties like to talk the talk, but rarely do they walk the walk. Brazil's authorities seem, however, to have finally woken up to the problem, at least at the administrative level, and further significant moves towards tax compliance centralization, laid out by the country's Inland Revenue last week, is certainly a move in the right direction. How things got to this stage, I don't know. Much of Brazil's tax complexity arises out the fact that it has a federal system of government, and there appears to be a lack of coordination between the three tiers of administration. But it still amazes me how the relatively simple act (in theory) of taxing a person's or a company's income got so complicated, not just in Brazil, but pretty much anywhere in the world where taxation exists.
    Source: https://www.tax-news.com/news/Brazil_Aims_To_Slash_Tax_Compliance_Burden____74972.html

  • Aug 02, 2017   Brazil: complex

    Now, staying on a televisual theme for a moment, the John Cleese award, for "stating the bleedin' obvious," goes to the International Monetary Fund this time, for advising Brazil that it - and its taxpayers - would benefit from a simpler tax regime. Of course, those who follow international tax developments are likely to be well aware that Brazil has one of the most complex tax regimes in the world for businesses. But for those who aren't in the know, let me apprise you of some of the grizzly details. Brazil routinely props up PwC's "Paying Taxes" time-to-comply league table, and last year it took the average medium-sized firm more than 2,000 hours to complete its tax compliance obligations. And that actually represented a considerable improvement over the previous year, when PwC put the figure at 2,600 hours. But what makes Brazil's tax system so nightmarish, when multinational companies are accustomed to tax complexity in the world's emerging markets (not to mention most developed ones too)? The interaction of national and state-level taxation must play a large part, as does the Government's incessant tinkering with aspects of taxation. Corporate tax, at a headline rate of 15 percent, looks fairly competitive at first glance. But that's before you factor in a 10 percent surtax and a nine percent social contribution, which takes the effective rate to 34 percent. This isn't an unusual occurrence, with many jurisdictions having effective corporate tax rates well above the headline level. Nor is the fact that taxpayers in Brazil face value-added tax at the federal level. What is more unique is that firms must also contend with the state level VAT system known as ICMS, several layers of labor taxes, including PIS/COFINS which are based on a company's revenue, and INSS, which is a payroll tax. Furthermore, taxpayers must also be mindful of the IOF, a tax on certain financial transactions at varying rates that are subject to frequent change. I suppose some credit is due to the Brazilian administration, which has managed to make some progress towards simplification at a time when the country has faced political crises. Nevertheless, if you were starting a tax system from a clean slate, Brazil could be held up as an example of how not to do it.
    Source: http://www.tax-news.com/news/Brazil_Should_Simplify_Tax_System_IMF____74785.html

  • Apr 11, 2017   Brazil: simplifies

    Now, I'm all for initiatives that make tax compliance and administration simpler. And perhaps Mexico could take a leaf out of Brazil's book and improve its tax compliance rating by putting in place more electronic filing processes. By doing this, Brazil managed to reduce the time it takes the average company to discharge its tax obligations by more than 500 hours last year, as these new systems began to bed in. That's almost 21 entire days – 21 days in which the company can now focus on its actual business, rather than the business of paying taxes. Nevertheless, it still takes the average company over 2,000 hours to comply with Brazil's dense spaghetti bowl of taxes. That's over 83 complete days of filling in and filing tax returns and other declarations, and making payments. And the Government is still apt to complicate matters with targeted and temporary tax measures. Indeed, it's surprising this company makes any profit for the Government to tax in the first place! But it's a step in the right direction.
    Source: http://www.tax-news.com/news/Brazil_Reverses_Payroll_Tax_Exemption____73878.html

  • Sep 06, 2016   Brazil: reeling

    Brazil has been rather quiet on the tax front recently. This is understandable, given the country has been busy hosting the greatest sporting event on earth, and impeaching its (now former) president. Brazil sneaked back into tax news recently however, and for a rather predictable reason: anti-dumping duties. Yes, it certainly knows how to put on a good show, both in the sporting and the political sense, but Brazil does have a tendency to lurch towards trade protectionism when times are tough. More generally however, for investors, Brazil must feel like a highly uncertain place at the moment, as would any country undergoing such political ructions. But if there's a silver lining to be found, perhaps it's the fact that its tax system surely can't get much worse. Indeed, Brazil is infamous for the complexity of its tax system, with the PwC Paying Taxes index informing us that it takes a medium-sized firm 2,600 hours a year on average to comply with Brazil's layer cake of taxes. Unfortunately, improving the tax regime might not be an immediate priority for Brazil. Indeed, if anything, tax hikes are on the cards as Michel Temer, the vice-president under ousted President Dilma Rousseff, and the man chosen to serve the remainder of her term, looks for ways to close the budget deficit, the full extent of which his former boss was accused of concealing. One thing you can't accuse Brazil of being is boring. And things could begin to liven up on the tax front again fairly soon.
    Source: http://www.tax-news.com/news/Brazil_Announces_New_AntiDumping_Duties_On_Chinese_Imports____72111.html

  • Jun 01, 2016   Brazil: rudderless

    On the subject of protectionism, we move to Brazil, which has been one of the world's keenest users of protectionist measures in recent years. So it was pleasing to learn that Brazil recently signed the Trade Facilitation Agreement, which creates binding commitments on signatories to expedite the movement, release, and clearance of goods and improve cooperation among WTO members in customs matters. Brazil was more recently in the news for adopting legislation necessary to introduce special customs arrangements for companies and athletes involved in the 2016 Olympic and Paralympic Games, in another good move. However, whether Dilma Rousseff will be attending the games in her capacity as Brazil's president is looking increasingly unlikely after she was suspended from the country's top political post as part of protracted impeachment proceedings. By all accounts, if she goes (and it is likely to be a case of pushed rather than jumped), Rousseff won't be missed by many people, having been at the helm when the economy veered towards the rocks, and accused of burying bad economic news with some creative budgetary accounting. But it is not just Rousseff who may be guilty here of squandering Brazil's huge economic potential. It seems that the country is suffering a leadership crisis of huge proportions, with senior governing party figures seemingly more interested in positioning themselves for the upcoming presidential vacancy than actually running the country. If I was a major investor in Brazil, I'd certainly be nervous about how things are going to turn out. Although completing my company's tax returns, which takes on average about 108 days per year, might be a useful activity to take my mind of these anxieties.
    Source: http://www.tax-news.com/news/Brazil_Introduces_ATA_Carnets_Ahead_Of_Olympics____71243.html

  • Feb 23, 2016   Brazil: complicated

    Traveling further down Latin America, I'm not entirely sure what's going on at Brazil's Manaus special economic zone at the moment. One week you read that it has secured investment from another major multinational firm. The next that business in the zone is falling. The negative headlines stand out all the more starkly given that generally, the world's most prominent free zones seem to be growing rather than shrinking. For instance, the Dubai international Financial Centre (DIFC) announced yet another record jump in company registrations last week. So what's Manaus doing wrong that the DIFC is doing right? Well for a start, companies locating in the latter don't need to pay any income tax. They also have the support of a highly responsive government attuned to the needs of businesses and investors. What's more, Dubai has more or less established itself as the major trade and finance hub between the European and Asian time zones. Companies in the Manaus free zone also benefit from tax exemptions and reductions, although not on the same comprehensive scale as those in the DIFC, or the 20-plus other free zones crammed into Dubai for that matter. Firms established in Manaus that meet certain requirements are exempt from import and export taxes, excise duties, and the PIS/PASEP and COFINS taxes, which are linked to imports. The key phrase here is "meeting certain requirements," for the guide to the Manaus free zone's tax incentives is 36 pages long – itself an indictment of Brazil's byzantine tax system, one of the most complex in the world. On the other hand, I wouldn't think that one needs to create new neural pathways between the brain's synapses to grasp the tax framework of the DIFC. In fact, in terms of regulatory and legal simplicity, Brazil and the UAE are poles apart; the UAE once again topped PwC's Paying Taxes index in 2016, while Brazil languishes in 178th. Manaus's other obvious disadvantage is its far-flung location, which is deep in the Amazonian region of Brazil. The DIFC on the other hand is on the doorstep of one of the world's major aviation and shipping hubs and emerging financial centers. But I suppose a direct comparison between the two is unfair. Manaus was intended to provide employment in one of the most remote and impoverished regions of the planet, which it seems to be doing. The authorities in Dubai on the other hand had a blank canvas to create one of the world's most vibrant economies, and the money to see it through. Still, perhaps the Brazilian Government could be a little more helpful to Manaus by easing those tax requirements.
    Source: http://www.lowtax.net/news/Manaus-Free-Trade-Zone-Operations-Shrunk-In-2015-70396.html

  • Nov 24, 2015   Brazil: clean

    I'm no climate change "denier" (a term I despise incidentally, with all its unpleasant overtones), but I'm not totally convinced that it's happening either. "Oh my, we are in a provocative mood this week aren't we?" I can almost hear you say. As I've alluded to before in this column, at the same time, I also happen to think that the world would be an infinitely better, healthier place if we stopped burning fossil fuels and switched to cleaner alternatives. I realize that we are undergoing something of a transition towards that end all over the world, and that it's not going to be completed overnight, or probably within my lifetime, but I would argue that governments are making a bit of dog's breakfast out it. The United States managed to send men to the moon with less computing power than is available in your smart phone – and that's because they spent billions of dollars on the Apollo program. Just imagine what could be achieved in the field of renewable energy if similar resources were made available, given how technology has advanced since 1969. But what do we have? A hodge-podge of carbon taxes, most of which get frittered away by some governments on unrelated spending programs, and the withdrawal of support for clean energy schemes by others. Astonishingly, some countries have actually taken to taxing renewables, with Spain, Hungary, and Germany guilty of levying – or trying to levy – charges on solar power. If you're wondering where this is headed, it's headed towards Brazil. I often chastise the Rousseff administration for its woeful record on tax, but it's getting an encomium this week for proposals to expand tax breaks for electric cars. True, it's a small step rather than a giant leap, but it's a step in the right direction.
    Source: http://www.tax-news.com/news/Brazil_May_Extend_Scope_Of_Tax_Breaks_For_Electric_Vehicles____69736.html

  • Sep 07, 2015   Brazil: stumbling

    The same cannot be said at the moment for Brazil however. Like India, Brazil has an almost unfathomable tax system, but unlike India, the Government is showing little interest in changing things for the better. Indeed, while India is trying to stabilize the tax regime, tax policy in Brazil is becoming increasingly erratic, with tax cuts announced one week and tax hikes announced the next. Nevertheless, the overall balance seems to be tilting towards a rising tax burden in Brazil, with Finance Minister Joaquim Levy recently announcing that another round of revenue-raising measures are necessary to help balance the budget. It shouldn't surprise us then that, while FDI in India is rising, foreign investment in Brazil is falling. According to fDi Markets, Mexico is racing ahead of Brazil in the Latin American race for FDI, with an estimated USD33bn invested in greenfield investment projects there last year. This was almost double the USD18bn invested in greenfield projects in Brazil in 2014. Although tax can't be the only reason why Mexico is outpacing Brazil in the FDI stakes, surely it can't be a complete coincidence that investment jumped; the Mexican Government has pledged stable taxes through a Tax Certainty Agreement, reaffirmed last month, which will keep Mexico's tax system unchanged throughout the remaining period of his administration. Notably, Moody's, the international ratings agency, downgraded Brazil's bond rating in August 2015, citing a lack of political consensus on fiscal reforms and general pessimism about the economy, among other reasons. In fact, after the Brazilian economy barely grew at all in 2014, some economists are expecting it to shrink in 2015. The reasons for Brazil's economic slump are complex, and some are linked to external forces beyond the Government's control. However, the damage must, to some extent, have been self-inflicted, including through weak and inconsistent tax and investment policies. Just like how India shot itself in the foot in the final years of the former Congress administration. Brazil could therefore learn a few lessons from the way its fellow BRICS member India seems to be turning itself around.
    Source: www.tax-news.com/news/Brazil_Planning_Tax_Hikes_To_Prop_Up_Finances____69046.html

  • Jul 07, 2015   Brazil: cuts tariffs

    Staying on the issue of trade, Brazil made the news again recently with its announcement that import tariffs would be cut on more than 160 items. A good thing, no? On the face of it yes, I suppose it is. Except that when it comes to trade and tax policy in Brazil, one doesn't know whether one's coming or going anymore! It's barely more than one month ago that the Brazilian Senate approved a bill that will raise taxes on a number of imported products, including automotive parts, beer, and pharmaceuticals. And about one month before that, CAMEX, Brazil's Chamber of Foreign Trade, announced that import tariffs would be reduced on certain automotive components. In 2014, Brazil's Government claimed to be a champion of trade liberalization in Latin America, yet it has been locked in trade disputes with Mexico and the EU, and has been handing out anti-dumping duties like confetti. If you run a business in Brazil, you could probably spend months attempting to stay abreast of the latest developments in trade and tax policy. Indeed, when it comes to tax compliance, that is almost quite literally the case, if PwC's Paying Taxes Index is to be believed. Governments in emerging nations like to justify tariff increases on the basis that they are protecting their economies. However, they must be serving as a hindrance to economic growth as much as a help. And ironically, high tariff and other trade barriers are said to undermine governments' attempts to reduce poverty, as observed in a new joint report by the World Trade Organization and the World Bank, which was published last week. Unfortunately, progress in this area will depend on whether the deadlock entrenching the Doha Round of world trade talks can be broken, and that doesn't look like happening anytime soon.
    Source: www.tax-news.com/news/Brazil_Cuts_Import_Duties_On_166_Items____68466.html

  • May 12, 2015   Brazil: free (Ama)zone

    Anyone noticed how popular free zones are becoming? Rarely a week seems to go by without a report about one country or another preparing to launch new free zones. Since the turn of the year we have seen Costa Rica explore the establishment of a special economic zone, China announce new free trade zones, Mexico set out plans for SEZs, Madagascar confirm ambitions for a SEZ, and seen new free zones in the Gulf region, including in Oman and Qatar. According to the World Free Zone Convention, more than 120 countries now have some form of free zone development program in place. One free zone that appears to be going from strength to strength is Brazil's Manaus Free Trade Zone, in the isolated Amazonas region of the country. Revenues for manufacturing companies based in the zone increased by five percent during 2014 and employment rates hit record levels over the course of the year, with a monthly average of 122,329 in the ten months to November. And this is no flash in the pan either. At the end of last month, the zone's board of directors approved another USD1.6bn worth of investments across 108 projects, and these are expected to create almost 2,500 new jobs. So the zone appears to be a success story in an area of the country where opportunities for people are limited. You could argue that free zones wouldn't be needed if governments reduced tax and regulation across the board, giving whole economies a chance to flourish. But that's almost a moot point these days because it would take such a seismic shift in thinking as to render such a prospect almost impossible. Still, as Manaus demonstrates, free zones are a useful tool to promote economic regeneration in particularly impoverished cities or regions. You'd think that they could be of major benefit to the troubled economies of Europe, like Greece, Italy, and Spain. They probably would, but EU rules on state aid don't allow free zones. The OECD doesn't like them much either because they could be considered "harmful" tax regimes that erode the tax bases of other countries. As I mentioned last week, it's a viewpoint that just goes to show how skewed the international tax debate has become, with the eradicate-tax-avoidance-at-all-costs camp drowning out any alternative arguments.
    Source: http://www.tax-news.com/news/Manaus_Free_Zone_Approves_Investments_Worth_USD16bn____67988.html

  • Jan 29, 2015   Brazil: Levy and levies

    Well it was fairly predictable wasn't it? The Brazilian Government cut a lot of taxes last year. Then there was an election in October, and President Dilma Rousseff won another four years in power. But guess what. Conditions seem to have changed so much since the election that the Government thinks taxes will have to rise. Credit is due to new Finance Minister Joaquim Levy for breaking the news gently to the Brazilian people, though. First, there was the hint of tax rises, with Levy telling taxpayers in early January that the country needs some "fiscal rebalancing." Levy laid the ground further a few days later by suggesting that tax rises, should they be needed, would have no effect on the economy. Then came the sucker punch: the finance ministry's announcement on January 19 of approximately USD7.8 billion in tax increases for 2015. Who'd have thought it? The reality is that Brazil's economy has been unbalanced for a number of years, and it is largely the Government that is to blame. As has become customary in such situations however, taxpayers pay the heaviest price. The Government has turned to that familiar fiscal lever, the IOF tax on financial transactions, which will result in the doubling of the tax on personal loans. It must be almost impossible to try to work out how much tax is payable on a financial transaction in Brazil, as the rates seem to change by the week. Indeed, Brazil's tax code is now so nightmarish that comparisons to a dense and impenetrable jungle akin to something you'd encounter in the farthest reaches of the Amazonian rainforest spring easily to mind. No wonder the economy is faltering. The average firm is spending almost a third of the year filling in tax forms.
    Source: www.tax-news.com/news/Brazilian_FM_Announces_Tax_Hikes____67054.html

  • Sep 11, 2014   Brazil: cutting taxes

    So while Azerbaijan is certainly no angel in the pantheon of nation states, it at least seems to be developing a coherent tax strategy. The same cannot be said of Brazil, which, although a member of the exalted BRICS club, is let down as an investment destination by its tax system. That said, while it has in the recent past been common for the Government to raise a tax one week, and cut another the next as it attempts to micromanage an economy buffeted by a strongly appreciating currency and high inflation, it has been noticeable that in the last few months the direction of taxation has been firmly down, including the extension of tax concessions in the Manaus Free Economic Zone, which, despite its location in the middle of the Amazonian jungle, recently attracted its first pharmaceutical manufacturer. Indeed, since the turn of the year, Brazil has cut individual income tax, cut tax on imported capital goods, made payroll tax breaks permanent, cut tax on foreign loans, extended tax breaks for the automotive and furniture industries, removed tax on most medicines, eased tax on technical fees, extended a tax break for the IT industry, extended tax exemptions for retail computer sales, and championed tariff elimination in South America. Unfortunately, I'm far too cynical these days to conclude that the Government's intentions here are entirely wholesome. There is an election to be fought next month after all, and the Brazilian economy is not in a happy place. President Dilma Rouseff may yet end up clinging on to power, but whoever wins, it will be interesting to see whether taxes start going back up again shortly after the election. Businesses in Brazil must sincerely hope not. Apparently it takes the average company in Brazil 2,600 hours a year to comply with its tax obligations. That's 108-and-a-third days, leaving only two-thirds of the year for companies to actually get any business done. Little wonder the economy isn't where it should be.
    Source: www.tax-news.com/news/Pharmaceutical_Factory_Opens_In_Manaus_Free_Zone____65677.html

  • Jun 26, 2014   Brazil: buffeted

    We are not supposed to knock Brazil during the World Cup, I imagine, but I am suspicious about the reintroduction of the Reintegra program, which gives tax credits to exporters. When it suspended the program last year after two years, the Government said it was too expensive. Well, what has changed? Growth was 2.3 percent in 2013 but will fall to 2 percent this year, at best; inflation is running at 6.5 percent, way ahead of the central bank's 4.5 percent target; the budget deficit is likely to increase from last year's 3 percent, not least because of heavy spending on the sacred World Cup, which most economists do not think will stimulate the economy much, if at all – in fact investment fell in the first quarter of the year. Interest rates are at 11 percent, up over the last eighteen months from 7.25 percent as the Government struggles to control inflation. It's not a pretty picture, and business is not helped by the Government's propensity for incessant fiddling with rates and regulations. Something that is new is the imminent Presidential election in which Dilma Roussef will try for a second term, and the Government's economic actions need to be seen in that light. Reintegra itself will obviously be welcomed by all Brazilian exporters, but does not seem to be an overtly political measure. Maybe they hope that it will stimulate economic activity in the months before the election. The measure is not overtly protectionist, although the tax credits are only given in respect of products with at least 60 percent local content. Perhaps that is not unreasonable, in order to target genuine manufacturing rather than re-exporting assembly plants. Yet I wonder.
    Source: www.tax-news.com/news/Brazil_Plans_Tax_Credits_For_Exporters____65031.html

  • Feb 28, 2013   Brazil: at it again

    Brazil is one of those countries which fiddles constantly with taxes in a protectionist way, tries to manage its exchange rate, and generally behaves badly in my book, so it's good to be able to welcome a tax concession aimed at improving connectivity. But then they would have to go and stipulate that 50% of any equipment installed must be sourced locally, so only half a cheer. Then you wonder, at least I would if I was a foreign supplier of modems, say, how to get around that rule. There is bribery, of course, but you're not allowed to talk about that unless you're Silvio Berlusconi; so the next thing might be to try to interpret the "sourced locally" wording. What does that actually mean? A certificate issued by the local fisc? Then what if you have assembled the modems locally from cheap bought-in components, it would depend on how much value you could attribute to the local process. Etc, etc and so forth. Lots of burrowing around in transfer pricing regulations, and boy, are those complicated in Brazil. You can see what a bureaucratic mare's nest the whole thing will become. Probably they would have done better not to put on the conditionality at all, but my Portuguese isn't up to explaining that to Finance Minister Guido Mantega. He's been in the job for six years now, so you would think he'd understand, but no . . .
    Source: http://www.lowtax.net/asp/story/front/Brazil_Introduces_Tax_Breaks_To_Boost_Internet_Access____59888.html

  • Jan 17, 2013   Brazil: attack is the best form of defence

    If Britain's parliamentary Public Accounts Committee, which has lately been slamming HMRC for being too soft on business, was suddenly translated to a modernist setting in Brasilia, it wouldn't want to attack the local tax authority for being too relaxed and chummy with large companies; on the contrary it would probably wail that the highly aggressive attitudes of the Receita Federal were alienating business and creating a relationship of enmity and mistrust which can only have bad results for Brazil's economy and its level of tax receipts. But the truth is more likely to be that both sides are simply reacting to the Byzantine complexity of the tax system. Americans complain that their Tax Code is too long and complicated; just try Brazil! The companies, for their part, know that they are going to have to fight excessive demands, so they make every possible assumption in their own favour; then the tax authority, on the principle that "the more you ask for, the more you get," puts in a demand that is two or three (or ten) times higher than what it hopes to extract. So off they go to court together, hand in hand, surrounded by flocks of lawyers. They're the ones that have the big houses on the hills in Rio.
    Source: http://www.lowtax.net/asp/story/front/Brazilian_Tax_Agency_Continues_Back_Tax_Crusade____59147.html

  • Jan 03, 2013   Brazil: may be reducing taxes

    "XYZ To Slash Tax Rates In 2013". Now surely that is a headline that will lead to a Good Country prize? But it's Brazil, and we need to inspect the fine print very carefully before expecting any real progress; the notorious Custo Brazil awaits the unwary businessperson around every corner. There are three main components to the package, and the first is actually a tax increase, at least over 2012 rates, with the IPI sales tax returning to nearer its normal levels in 2013. But, obscurely, this amounts to a leveling of the playing field for foreign manufacturers, since the reductions in 2012 were only available to domestic manufacturers and foreign cars with high domestic content. Brazil was much criticized for this. The second plank is a reduction in social security taxes, and apparently a savage cut, from 20% to 1%; but it applies mostly to retail and construction. Surely it will have a boosting effect for local businesses, but it's not clear it will do much for international investors. Finally, the tired old ICMS is waved about again: the administration has been wanting to reduce ICMS (the state level VAT) ever since I started to write about Brazil, but the complications of federal/state rivalry and associated political power-broking have always stopped progress. The ICMS is a beast of ferocious complexity, but I see no reason for this government to be any more successful in taming it than were previous ones. So, only half a cheer for Brazil. At least they have good intentions.
    Source: http://www.lowtax.net/asp/story/front/Brazil_To_Slash_Tax_Burden_In_2013____58969.html

  • Nov 29, 2012   Brazil: cooking the books

    Jam tomorrow. Or perhaps in Brazil it's coffee tomorrow. Anyway that's how the government justifies pretending that it will make its budget forecast this year. It is so sure that it will have good growth in 2013 that it is kicking forward 20bn dollars worth of capital expenditure (money already spent this year). Neither the IMF nor any other international onlooker thinks that this is fair play. If a company did it, it would be reprehensible if not worse. And why? So that President Dilma Rousseff doesn't have to make mandatory but politically inexpedient cuts in public spending. OK, so they just change the rules! Not in my book; so a big black mark. They are fooling only themselves.
    Source: http://www.lowtax.net/asp/story/front/Brazil_Confident_Of_Achieving_Budget_Surplus_Next_Year____58392.html

  • Oct 11, 2012   Brazil: Brazil's protection racket

    Brazil, one of the usual suspects, is at it again with protectionist legislation prettily dressed up in green. But the finance minister made no pretence about it, saying that it was to close the gap between domestic sales and production in the auto industry. Sorry, but isn't that a complete denial of trade? The whole point of trade (said Ricardo) is for two partners to swap or sell each other what each does better than the other. But never mind the merchantilist stupidity; what about the affront to Brazilians? Why should they have to pay more for inadequate machinery badly made in feather-bedded factories because the owner has a friend in Brasilia, when the same product is available better-built at 30% less cost from a foreign producer? It makes me angry; maybe you can tell!
    Source: http://www.tax-news.com/news/Brazil_Announces_Tax_Breaks_For_Car_Industry____57677.html

  • Sep 06, 2012   Brazil: fiddling while the toast burns

    Brazil must be the world's champion tax-fiddler: as if its tax system wasn't complicated enough already, it is forever changing rates and incentives to favour or disfavour this industry or that. That's on the surface: just imagine how much lobbying and less mentionable types of persuasion are going on; Brazilia makes the Beltway look like a haven of stability. So, a bad mark for this week's extension of the unnecessary IOF reduction on home appliances. Just scrap the tax altogether, please!
    Source: http://www.lowtax.net/asp/story/front/Brazil_Defers_Withdrawal_Of_Tax_Stimulus____57133.html

  • Aug 09, 2012   Brazil: replaces one jungle with another

    Brazil has immense natural riches, a reasonably liberal society, and in general terms is business friendly. But the government doesn't 'get it'. Simplicity and stability are what is needed if business is to thrive, and even Brazil's warmest friends wouldn't claim either of these virtues for the country. Its attitudes, on the contrary, and lamentably protectionist and merchantilist, as most recently witnessed by the shabby history of its attempts to preserve its automotive industry from the consequences of international competition. Don't know where these attitudes come from, but there must be a fair bit of post-colonialist anti-European angst involved, cynically used by the ruling industrial oligarchy to further its own selfish interests. Of course I could be talking about any one of a number of emerging markets. India springs to mind as being quite similar. These policies may work in the short-term, but in the longer run they will be negative for the country that uses them.
    Source: http://www.lowtax.net/asp/story/front/GM_Mulls_Factory_Closure_As_Brazilian_Tax_Breaks_Expire____56678.html

  • Jun 28, 2012   Brazil: gets something right, for a change

    If I give Brazil a star for reducing the scope of its 'IOF' tax, it's not because I think that there is an internationalist, liberal economist calling the shots in Brazil's finance ministry. On the contrary, Brazil has a merchantilist, protectionist attitude in general terms, and must be a dreadful place to do business for any foreigner; but we must be fair, and a tax reduction is just that, whatever its provenance. Don't worry, they'll reverse it like greased lightning once the Real starts to appreciate again.
    Source: http://www.lowtax.net/asp/story/front/Brazil_Eases_IOF_Tax____55980.html


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