Government eliminates import tax to curb inflation

Marcelo Guaranys — Foto: Marcelo Casal Jr./Agência Brasil
Marcelo Guaranys — Foto: Marcelo Casal Jr./Agência Brasil

The government is zeroing the import tax rate of several products to contain inflation, said on Wednesday the executive secretary of the Ministry of Economy, Marcelo Guaranys, in an interview to announce decisions taken by the Executive Management Committee of the Foreign Trade Chamber (Gecex/Camex). “These measures don’t reverse inflation, but businessmen think twice before raising prices,” Mr. Guaranys said. The discussion about steel was intense in the last two days, he added.

Beef, chicken meat, wheat and wheat flour, corn grain, cookies and crackers, and other pastry products had their import tariffs reduced to zero. Besides these, sulfuric acid and mancozeb (the latter had its tax reduced to 4%) are also on the list.

Tariffs were also reduced for two categories of steel, which are rebar used in construction, said Camex secretary Ana Paula Repezza “The impact, in this case, will not be direct on inflation,” she added, noting that the request to reduce steel taxes had been under consideration for eight months. For rebar, the import tariff fell to 4% from 10.8%.

The reductions are valid until December 31, 2022, and will bring an impact of R$700 million in tax waivers, said Herlon Alves Brandão, undersecretary of Intelligence and Statistics of Foreign Trade at Camex.

This loss, however, will not need to be compensated with the indication of other sources of revenue, because it is a regulatory tax, clarified the deputy executive secretary of Camex, Leonardo Diniz Lahud. “Import taxes don’t have a collection function, they regulate the market, either for one side or the other,” he said.

About the import tax of 4% established for steel rebar, Ms. Repezza said it is in line with the world average. She also added that the meeting held the day before with businesspeople from the steel sector was not the first to analyze the issue and that the decision taken now is the result of a process that has been going on for months and included a wide debate.

On Tuesday, after the meeting, leaders of the Instituto Aço Brazil, which represents steelmakers, said that Economy minister Paulo Guedes had instructed the team to re-examine plans to cut the product’s import tariff to 4% from 10.8%. The tariff cut is a request made by the construction industry, which complains of rising prices.

Mr. Guaranys contextualized the decision on the import tax by speaking that the opening of trade is related to improving the business environment and increasing productivity and competitiveness, one of the major pillars of economic policy. “We have made very important steps in this context,” he said. “Minister Paulo Guedes’s line is to make gradual opening.”

The first move was the 10% cut in import tariffs on capital goods and technology; then the 10% reduction of practically the entire Mercosur Common External Tariff (TEC). Then, an additional 10% cut was made on the tariffs for capital goods and technology and at the moment there are negotiations with Mercosur for a new cut in the TEC. Internally, the government cut the Industrialized Products Tax (IPI) by 35%.

“We have been going through a moment of great inflation, harmful to the population,” said Mr. Guaranys. “We he reduces rates on some specific products, with an impact on the population”.

Source: Valor International