Bolsonaro Eliminates Petrochemical Benefits to Reduce Airline Tax

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In an act published by President Jair Bolsonaro (PL) on Friday night (31), the government ended tax incentives for companies in the petrochemical sector.

The end of the Reiq (Special Regime for the Chemical Industry) was carried out through an MP (provisional measure), which takes immediate effect but needs the approval of Congress after 120 days – this period is only counted after the resumption of work in the Legislative.

The end of benefits to the petrochemical sector was adopted as a way to offset another government measure: the reduction of IRRF (Withholding Income Tax) on aircraft leasing. This was a demand from the airline industry, but it displeased the chemical industry.

According to André Passos Cordeiro, Institutional Relations director at Abiquim (Brazilian Chemical Industry Association), the government’s decision took the sector by surprise and, if maintained, should lead to a drop in national production.

The measure is also expected to reduce annual revenue by R$ 3.2 billion and eliminate 85,000 direct and indirect jobs, according to calculations by the FGV (Fundação Getulio Vargas).

“It’s a big blow in the sector, given that this discussion had already taken place in early 2021. The immediate end of Reiq had already been evaluated by Congress and they extended it until 2025, understanding that the special regime should not be used to make compensations. “

Cordeiro adds that, although the tax reduction on aircraft leasing is legitimate, the use of the Reiq to achieve this measure only brings wear and tear to the petrochemical sector and increases legal uncertainty.

“We can’t plan even in the very short term. Let’s go back to talking to lawmakers so that this can be reviewed.”

The measure came on the same day that the president signed the law that extends the exemption from the payroll of 17 sectors of the economy until the end of 2023.

According to the Planalto Palace, an orientation from the TCU (Court of Accounts of the Union) made it possible for the exemption to be extended without the need for compensation.

The president also sanctioned a law to renew the IPI exemption on the purchase of cars by taxi drivers and people with disabilities.

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