Originally published in the September 15 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Brazil’s House of Representatives is reviewing two bills that propose to tax exports of minerals in natura with the state value added tax (ICMS). Rates would be progressive over a 10-year period after the bills enter into law.
Constitutional Amendment Project 283/2008 proposes an amendment to the federal constitution to allow the levy of ICMS on exports of minerals in natura of any kind. Complementary Law Project 390/2008 would regulate Amendment Project 283 and would establish the progressive ICMS rates on those mineral exports. Lawmaker Roberto Rocha presented both bills to the House of Representatives on July 16.
Constitutional Amendment Project 283 proposes to change paragraph 7 of article 155 of the constitution to create an exception to the general ICMS constitutional exemption (tax immunity) applicable to all exports. The project provides that the ICMS tax immunity would not apply to exports of minerals in natura.
Complementary Law Project 390 would regulate the levy of ICMS on mineral exports. It would establish that ICMS on those exports would be a percentage of the maximum ICMS rate existing in a given state and would be increased over 10 years.
In a state where the maximum ICMS rate is 18 percent, the ICMS on minerals export would be 3.6 percent (20 percent of 18 percent), 7.2 percent, 10.8 percent, 14.4 percent, and 18 percent from years 6 through 10, respectively.
With the new ICMS taxation, Rocha expects to correct existing economic distortions and risks, one of which would be deindustrialization of the country. High commodity prices in international markets increase Brazilian exports of minerals and put pressure on Brazil’s currency.
Rocha wants to increase local processing of minerals, which would add more value to the final product, require more local investments, and generate more tax revenue and jobs than the mere extraction of those minerals from the soil and their export in natura.
The House commissions of Economic Development, Industry and Trade, Finance and Taxation, and Constitution and Justice will review Complementary Law Project 390 before it is submitted to the full House of Representatives for a vote.
Constitutional Amendment Project 283/2008 follows a different legislative procedure. First the House Commission of Constitution and Justice will review it for validation of its constitutionality. If that commission approves it, a special House commission will be formed to review and vote on its text, before submission for a vote in two rounds by the full House of Representatives.
David Roberto R. Soares da Silva