Government considers cutting incentive to soft drinks in arm wrestling with AM bench

The Jair Bolsonaro (PL) government is considering cutting the tax incentive for soft drink concentrate manufacturers installed in the Manaus Free Trade Zone. The measure would offset part of the waiver resulting from the debt renegotiation program of MEIs (individual microentrepreneurs) and small companies from Simples Nacional.

The government’s first option was to raise taxes on banks. as showed the sheetthe CSLL (Social Contribution on Net Income) of these institutions, currently at 20%, could rise to a level between 21% and 23%, but the initiative faces strong opposition from Febraban (Brazilian Federation of Banks) and may end up being left out from the measurement menu.

Compensation is a requirement of the LRF (Law of Fiscal Responsibility), since the adhesions of the taxpayers are made through discounts in fines and interest. The Federal Revenue calculates a waiver close to R$500 million.

According to government sources, Bolsonaro is upset with the bench of parliamentarians from Amazonas, to whom he attributes the articulation behind a lawsuit that seeks to overturn the 25% linear cut in the IPI (Tax on Industrialized Products) – a measure taken over by the president. as a positive flag of its mandate.

The Palácio do Planalto insists on cutting the benefit of soft drinks to send a message to the bench, which has among its members Senator Omar Aziz (PSD-AM) – with whom Bolsonaro also antagonized when the congressman presided over the CPI (Parliamentary Commission of Inquiry). ) of Covid-19.

However, the partial reduction of the incentive should generate revenue close to R$ 178 million. In other words, the measure is insufficient to compensate, alone, for the resignation with the program aimed at small entrepreneurs.

For this reason, the government has not yet completely ruled out any increase in the banks’ CSLL, albeit less intense. Despite this, there is resistance within the government to expand the taxation of banks.

Another alternative would be a temporary increase in the IOF (Tax on Financial Operations) on credit operations, which would increase the cost of loans for companies and individuals at a time when interest rates are already high.

Unlike the CSLL, which requires 90 days in advance to have the rates increased, the IOF can be increased immediately, without the so-called ninety.

The government hopes to reach a definition in the coming days. Representatives of small businessmen are in a hurry to define, since the deadline for joining the renegotiation ends on April 29. This date is defined in a supplementary law.

A possible cut in the tax incentive for soft drinks would hit large companies in the sector, such as Ambev and Coca-Cola, which today use the benefit to collect less taxes, such as IRPJ (Income Tax for Legal Entities) and CSLL.

Abir (Brazilian Association of Soft Drinks Industries), which represents large companies, says that it does not comment on measures that are still being discussed internally by the government.

The companies that produce the syrup for soft drinks and are located in the Free Zone are exempt from IPI, but even without paying taxes they generate tax credits for large bottling companies that purchase the concentrate. The benefit is equivalent to the amount of the soda syrup tax.

Until the end of February, the rate was 8%, but thanks to the 25% linear tax cut, promoted by the Ministry of Economy, it had already fallen to 6%. Now, the rate should drop to 4%. The lower this percentage, the fewer credits large companies have to deduct their taxes.

The government has already opposed the bench of parliamentarians from Amazonas with the linear cut of the IPI, which takes away the competitiveness of products from the Free Zone. The tax exemption is a differential for companies in the region.

The IPI reduction took place amidst the government’s negotiations to approve the diesel tax relief package in the National Congress.

To undo the unease and ensure the vote on the measures, Minister Paulo Guedes (Economy) had to step back and promised a new decree to withdraw from the IPI cut the products that are made in the Free Zone.

This decree would be issued together with an increase in the reduction of rates on other products, from 25% to 33%. This new cut, however, was postponed precisely because Bolsonaro was irritated by a lawsuit by the Pros asking for the suspension of the decree that eased the tax burden on these goods.

Bolsonaro’s irritation was visible during the president’s live on Thursday night (1st). The action ended up going into the hands of Minister Alexandre de Moraes, of the Federal Supreme Court (STF), whom the Chief Executive has already attacked several times.

“Our dear Minister Alexandre de Moraes is drawn as rapporteur for the Pros action against Bolsonaro’s decree that reduces IPI [em] up to 25%. In other words, the Pros party is against the reduction of IPI on cars, motorcycles, white goods such as refrigerators, stoves, microwaves,” Bolsonaro said.

“And it is in the hands of the dear Minister Alexandre de Moraes whether he is going to have this decree of mine archived or to say that it is in effect. If he has it archived, personal attention: It will go up [o] IPI [em] 25% by car, motorcycle, refrigerator, stove, etc etc etc”, added the president.

The size of the tax benefit linked to soda syrup is a long-standing dispute. In May 2018, the Michel Temer government (MDB) aroused the ire of large manufacturers by cutting the IPI rate from 20% to 4%, which reduced the tax incentive by five times.

At the time, Coca-Cola threatened to stop its soda production in the Manaus Free Trade Zone if the benefits were not refunded. The company officially denied the incident, but weeks later Temer backed off.

In September 2018, the government increased the rate to 12% in the first half of 2019 and stipulated that it would gradually decrease to 8% in the second half of 2019, returning to 4% in 2020.

During the Bolsonaro government, Guedes’ team gave in to the soft drink industry by raising the rate to 8%, initially from June 1 to November 30, 2020. On the eve of the end of the bounty, the president signed a new decree extending the higher rate, this time without a deadline.

“The increase in the IPI rate seeks to ensure an adequate fiscal policy for the Manaus Free Trade Zone, given that, currently, most of the production of concentrated soda extract is centralized in this location”, justified the government at the time.