Bolsonaro extends linear cut in IPI to 35%

President Jair Bolsonaro (PL) edited a decree to expand the linear cut in IPI (Tax on Industrialized Products) rates from 25% to 35%, under the justification of stimulating the economy.

With the measure, the government forgoes R$15.2 billion in tax revenues in 2022, the year in which Bolsonaro will seek reelection.

Although Brazil remains with a deficit in its accounts, the government has used the increase in federal revenue to announce tax cuts in an election year.

In a statement issued on Thursday night (28), the General Secretariat of the Presidency of the Republic informs that the reduction reaches “most products”, but does not give details. In the first round, tax relief included automobiles, cell phones, televisions, refrigerators and other white goods.

​The possibility of expanding the IPI cut was mentioned by Minister Paulo Guedes (Economy) on Wednesday (27), during a seminar organized by the IDB (Inter-American Development Bank) and the Federal Revenue Service.

“We have just reduced by 25% and we are going for another round, lowering the IPI drop to 35%”, he said.

The signal represented a new change of direction around the theme, after Guedes indicated that he would deepen the reduction of the IPI and, later, withdraw from the decision.

Initially, the forecast was to expand the reduction to 33% for some products, at the same time that there would be a reversal of the cut for goods produced in the Manaus Free Trade Zone — a request from the bench of parliamentarians from Amazonas to maintain the competitiveness of industries in the region. , already exempt from IPI.

However, the measure was postponed after Bolsonaro was angered by a lawsuit asking for the suspension of the decree that eased the tax burden on industrialized goods. Since then, a backstage arm wrestling has taken place with the Amazonas bench.

On Wednesday, Guedes stated that the space for the additional cut in the IPI rate comes from an unforeseen increase in collection. “We are transforming the unexpected increase in revenue, the excess revenue, was well above our forecasts, in line with the Bolsonaro government’s promises during the campaign, reducing the rates,” he said.

At the event, the minister also stated that indirect taxes are regressive and “are more perversely levied on the weakest”.

The cut in the IPI will take effect immediately and, as it is a regulatory tax, it does not require a compensation measure. The impact on revenue will be BRL 27.4 billion in 2023 and BRL 29.3 billion in 2024.

“The present measure aims to stimulate the economy, affected by the pandemic caused by the coronavirus, in order to ensure the levels of economic activity and the employment of workers. General, in note.