Originally published in the May 19 edition of World Tax Daily (Copyrights Tax Analysts)
In hearings before Brazil’s Chamber of Deputies’ commissions on May 12, Minister of Development Miguel Jorge said the government is considering exempting purchases of machinery and equipment from the Program for Social Integration contribution (P.I.S.) and the Contribution for the Financing of Social Security (COFINS).
The tax break would be welcomed by the private sector, which has long called for such a move.
Jorge said that although Brazil’s technical recession has been mild compared with other countries, it is unwise to tax investments upfront during a recession, particularly when the investments will not produce for months after the relevant machinery and equipment have been purchased.
In conjunction with Jorge’s statements, Minister of Planning and Budget Paulo Bernardo told Congress that the government does not plan to introduce any new tax increases to offset an estimated revenue loss of BRL 48.4 billion (approximately $23 billion) caused by the international economic crisis.
According to Bernardo, the government is taking the opposite approach, considering tax reductions to stimulate the economy. He did not rule out the possibility of a new round of temporary tax breaks, particularly for the federal excise tax (IPI). Bernardo said new tax breaks, albeit temporary, may stimulate demand and help compensate for the expected revenue loss.
David Roberto R. Soares da Silva