In addition to cigarettes and alcoholic beverages, the government’s proposal to regulate tax reform provides for the levy of the so-called “sin tax” on cars, aircraft, boats, sugary drinks, oil, natural gas and iron ore.
All of these items are on the list of products that will be subject to the future selective tax, provided for in the constitutional amendment of the reform enacted last year and aimed at discouraging the consumption of products considered harmful to health and the environment.
The list appears in the first complementary bill that regulates the reform, delivered on Wednesday (24) by the Minister of Finance, Fernando Haddad, to the president of the Chamber of Deputies, Arthur Lira (PP-AL). The text does not contain the selective tax rates, which will be defined later through ordinary law.
Despite pressure from medical professionals and recommendations from the Ministry of Health, ultra-processed foods were left out of the targets of the new tax.
The constitutional part of the reform already established that operations with electricity and telecommunications will be immune to the selective tax. In addition, goods and services covered by the reduced rate of the new Value Added Tax (VAT) will also be free from the “sin tax”, as well as collective public transport services for road and metro passengers of an urban, semi-urban and metropolitan nature.
In the reform calendar, the selective tax will come into force from 2027, replacing the Tax on Industrialized Products (IPI), which currently fulfills the extra-fiscal function of market regulation.
Selective tax on vehicles, aircraft and vessels
According to the government, the incidence of tax on cars, aircraft and vessels is justified “because they emit pollutants that cause damage to the environment and humans”. In the case of motor vehicles, those classified as cars or light commercial vehicles will be more specifically affected.
According to the text, the final selective tax rate in this category will vary, based on a base rate, depending on the following criteria:
- vehicle power;
- energy efficiency;
- structural performance and steering assistive technologies;
- recyclability of materials;
- carbon footprint; It is
- technological density.
Vehicles classified as “sustainable” will be spared the “sin tax”, having the tax rate reset to zero. To do this, they will need to meet certain indices of the following criteria:
- carbon dioxide emission;
- vehicle recyclability;
- carrying out manufacturing stages in Brazil; It is
- vehicle category.
The project also provides for exemption from selective tax on cars sold to people with disabilities or to taxi drivers.
Selective tax on tobacco products and alcoholic beverages
Among the smoking products that will be subject to the tax are, in addition to cigarettes: cigars, cigarillos, artisanal cigarettes, chopped tobacco, pipe tobacco, hookah tobacco, among others.
The form of incidence of the selective tax, according to the proposal, will be the same as that already applied to the production of cigarettes through the Tax on Industrialized Products (IPI), that is, a combination of rates ad valorem (which varies with the value of the product) and specific.
The suggested taxation for alcoholic beverages would follow the same model, with a specific rate per quantity of alcohol and a rate ad valorem. The model is that defended by the brewing industry, in opposition to producers of distilled drinks, such as cachaça, gin and vodka, who are against gradual taxation.
The collection, according to the project, will be made once, on the first sale of the drink by the manufacturer, except in situations such as import, public auction (auction of pledged goods) and non-onerous transfer.
Selective tax on sugary drinks
One of the target categories of the “sin tax” that is likely to generate the most controversy is sugary drinks, which includes soft drinks. The possibility of surcharging food and drinks considered harmful to health is rejected by 90% of Brazilians, according to a survey commissioned by the Brazilian Food Industry Association (Abia).
The same survey showed that 86% of respondents are against increasing taxes on food and beverages in general and that 85% support reducing the current tax burden on products.
The government justifies the decision by claiming that there is “consistent evidence that the consumption of sugary drinks harms health and increases the chances of obesity and diabetes in several studies carried out by the World Health Organization [OMS]”.
Still according to the justification of the complementary bill, taxation was considered by the WHO as one of the main instruments to contain the demand for this type of product. According to the entity, 83 member countries already tax sugary drinks, especially soft drinks.
The proposal is that taxation occurs on the manufacturer’s first sale, on import or at public auction.
Selective tax on extraction of iron, oil and natural gas
The incidence of the selective tax on the extraction of iron ore, oil and natural gas would occur on the first sale by the extractive company, including cases in which the ore is intended for export. There is also the possibility of impact on the non-costly transfer of extracted or produced mineral goods.
In situations where companies use ore extracted in their own production chain, the triggering event was defined as the consumption of the mineral good, whose calculation basis will be defined by a reference price. The project foresees the reduction to zero of the tax rate for natural gas that is used as an input in industrial processes.
Even before the government presented the proposal for products to be surcharged with the selective tax, the mining and oil and gas sectors were already speaking out against the inclusion of the products on the list.
This is because iron ore and oil are two of the country’s main export products, which involve heavy investments in exploration and production, and the surcharge could be a disincentive for the sector. Furthermore, the increase in taxation tends to affect, for example, the price of fuel at the pump for the final consumer.
Check below the full “IBS, CBS and Selective Tax General Law Project”, or click here to open in new window.
Infographics Gazeta do Povo[Clique para ampliar]
Infographics Gazeta do Povo[Clique para ampliar]
Infographics Gazeta do Povo[Clique para ampliar]
