Tax increase on Brazilian imports could hurt distributors

Friday, 13 February 2015 01:52:12 (GMT+3)   |   Sao Paulo
       

Sources are diverging on whether an increase in the PIS/Pasep and Cofins taxes on Brazilian imports will hurt local distributors.

In the beginning of the year, Brazil’s new finance minister, Joaquim Levy, proposed changes to the percentage those taxes should have. According to the minister, the tax increase aims to correct a “distortion” Brazil’s Supreme Court (SFT) put on the ICMS tax that was eliminated from the calculation of the PIS/Cofins tariff.

According to a document published by Brazilian government, Brazil imports will pay a 2.1 percent PIS/Pasep tax, and a 9.65 percent Cofins tax.

“At the time the new rules were proposed, everyone complained,” one trader told SteelOrbis. “I think it will affect exports to Brazil in the short term, but not in the medium and long terms.”

Another trader said distributor margins in Brazil won’t be affected. “The problem affects those who bought steel products from outside Brazil and didn’t ‘nationalize’ them before the new terms were applied,” he said. “Those distributors might be affected, as they didn’t expect the tax increase.”

“But the question is, are distributors likely to pass the tax increase over imports to the end-user?”

“As the US dollar rises compared to the Brazilian Real, everyone is scared,” concluded another source. “But once the dollar gets back to its normal currency, everything will be normal again.”

 


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