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Goal is to eliminate wharfage services or terminal handling charges — Foto: Leo Pinheiro/Valor
The government has a decree ready to change the way import tariffs are collected. With this, the economic team believes it will achieve an additional reduction of 1.5 percentage point of the rates on imported goods.
The idea, according to aides to Minister Paulo Guedes (Economy), is to eliminate wharfage services, or terminal handling charges, from the tax calculation basis. Wharfage is the loading and unloading work of cargo in general at port terminals.
Today the tax rates on imported goods are applied taking into account the terminal handling charges. Government sources argue that Brazil is one of the few countries in the world to adopt this practice. Not even other Mercosur members, including Argentina, do so.
The provisional measure that changes the collection system already has the approval of the ministries involved and the Presidency’s Sub-Office for Legal Affairs. A final analysis is being made by the Federal Attorney General’s Office (AGU) to completely rule out the risk of illegality because of the proximity to the election period. If it passes, the provisional measure will be signed into law by President Jair Bolsonaro.
The Economy Ministry expects a 10% linear reduction in import tariffs. The Common External Tariff (TEC) is currently at 11.6%. This would mean, approximately, a cut of 1.5 percentage points.
It would be, in practice, the third cut in TEC made by Brazil. Last year, there was already a 10% reduction in the rate. This month, the Brazilian government announced another 10% cut. Both, however, are temporary and valid until the end of 2022.
In the case of removing terminal handling charges from the calculation basis, this is a definitive change, in principle. It is an old plea of the private sector, led by the National Confederation of Industry (CNI), and the government prefers not to talk about “loss of revenue”, considering that the import tariff is essentially a tax of a regulatory nature.
According to the ministry, the estimated loss of revenue with this change is R$ 461.3 million in 2022 but falling in the coming years. The economic team emphasizes, however, that the most important is the reduction of the so-called “Brazil cost” and the gain in competitiveness with the measure.
“The cap rate in the customs value has always been incompatible with the rules of the World Trade Organization (WTO), because it distorts the competitiveness of productive sectors in domestic and foreign markets,” says Leandro Barcelos, international trade coordinator at BMJ Associated Consultants.
“Brazil is still one of the only countries that charge this tax, generating an additional cost in the acquisition of inputs used in the production chain. The removal of the wharfage tax would be a good thing in the government’s strategy to relieve the import tax base. The removal of the tax would significantly reduce industrial costs and increase, in the medium term, the competitiveness of Brazilian industry, and would directly impact the reduction of product costs for the final consumer.
Source: Valor International