Brazil considers slashing taxes to boost industry

Brazil’s government is considering reducing the rate for its Tax on Industrialized Goods—a federal levy on industrialized products, both domestic and imported, sold in the country.

According to Economy Minister Paulo Guedes, the goal is to stimulate economic activity by lowering costs that the productive sector ends up having to leave for final consumers to pay.

“We’ll re-industrialize the country,” Guedes said today during an event by bank BTG Pactual, in São Paulo. “We’re preparing a move with the support of lower house speaker [Arthur Lira], the president’s chief of staff [Ciro Nogueira], and, above all, President [Jair Bolsonaro],” the minister added, underscoring the importance of reducing taxes in Brazil.

“Note how agriculture is soaring, because there’s no tax on agricultural goods. Now, the Brazilian industry has strained in the last three, four decades under high taxes, high interest, and excessive labor costs. We have to tackle these three issues, and we’ll make a first step now, cutting 25 percent of the Tax on Industrialized Goods. It’s a move for the re-industrialization of Brazil,” he declared.

Privatization

The economy minister also argued that a portion of financial resources stemming from the sale of state-run companies and public service concessions be put towards initiatives to fight inequality, like the Fund for the Combat and Eradication of Poverty. This should strengthen people’s support for privatizations, serving as a boost for the political class to speed up privatizations, he said.

“If we sell a state-controlled company and we take 20 or 30 percent of the debt reduction [and direct it towards] the Fund for the Eradication of Poverty, it’s a transfer of wealth,” he said. “There might be an increase in popular support [for privatizations].”