Brazil Senate passes bill to increase import taxes

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– Taxes on a range of imported products would be increased in hopes of boosting revenues by $337 million next year

By Ben Tavener

SAO PAULO – The Senate here passed a bill Thursday that, if made law, will increase taxes on a range of imported products.

Everything from beer to perfumes will require higher taxes, ostensibly both to boost revenues and protect the domestic market.

Two import taxes are affected, which together would increase tax contributions from 9.25 percent to 11.75 percent on most products — and up to 20 percent in some cases.

Among the affected products are vehicles, including buses, vans, related machinery, automobile parts, tires and inner tubes; pharmaceutical and contraceptive products; paper; toiletries, perfumes, and hygiene products; imported beers and bottled soft drinks, including water and juices.

The bill now proceeds to President Dilma Rousseff for sanctioning.

The government said the bill is part of a package of measures to readjust the economy which has already included tax hikes in other areas, including state-administered prices such as water and electricity bills, and that it give a boost to national industry.

“Today we help complete this piece of our strategy to balance the economy,” said Finance Minister Joaquim Levy, defending the move as crucial for domestic markets and industry.

If made law, the select tax increases are expected to accrue additional revenues of $220 million (694 million reais) this year, and $337 million (1.19 billion reais) from 2016.

Although touted as defending national industry, several politicians and economists have criticized the bill, arguing it will leaded to an increase in inflation, which is already significantly above-target, while simply passing on all the increases to the final consumer.

The Brazilian Foreign Trade Association believes the increases are not the best way to improve the country’s current lackluster economic situation.

“Brazil already has a very high rate of tax on many imported products, and we do not believe that these tax hikes are the answer to Brazil’s economic situation, as they exacerbate the rate of inflation and do not benefit society as a whole: consumers end up paying the price, not the importers,” the association’s vice president, Fábio Faria, told Anadolu Agency.

“These tax increases also end up affecting industry, so we would be keen to see any new increases reversed as soon as they have had the short-term desired effect on the economy,” Faria explained, instead defending the public spending cuts recently announced by the government — of close to 70 billion reais ($23 billion) — as the most efficient path to fiscal adjustment.

Brazil’s annualized rate of inflation is currently running above 8 percent, while the government’s central target is 4.5 percent with a tolerance band of plus or minus two percentage points.

The same bill, known as MP 668, also came with a helping of controversy, providing for an extension to be added to Congress, which could include what lawmakers have dubbed “Parlashopping” — a mall with shops and restaurants, as well as underground parking spaces for as many as 4,400 vehicles, which its critics have urged Rousseff to veto.