Economy & Business - March 2022

BRAZIL | Tax cut to spur ‘reindustrialisation’. On 25 February, Brazil’s President Jair Bolsonaro issued a decree reducing the tax on manufactured products (imposto sobre produtos industrializados, IPI) by 25%. The tax cut will not apply to products which contain tobacco and will be limited to 18.5% for certain products, such as cars. It is estimated that the tax cut will shave R$19.6bn (US$3.9bn) off the Brazilian state’s tax revenue (a loss which will be spread between federal, state, and municipal governments). But the federal government argues that the tax rebate will help increase productivity; Economy Minister Paulo Guedes says it will benefit 300,000 businesses and ultimately help create jobs, increase the wage bill, and lower inflation. “This is going to bring about the beginning of Brazilian reindustrialisation”, Guedes assured. The reduction to the IPI has been welcomed by parts of the industrial sector, such as the association of car manufacturers (Anfavea), but severely criticised by state and municipal governments, who accuse federal authorities of “being generous” by cutting local governments’ resources.

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