Tax package releases production by US$ 728.3 million
Folha de S. Paulo 03/31/2009
As a part of the efforts to avoid the worsening of the crisis in the country, yesterday the Federal Government announced a new tax package that foresees a tax reduction of R$ 1.675 billion (US$ 728.3 million). But, as a sign of the limit of its actions, it had to increase the other tax, on cigarettes, so as not to further hamper the tax balance at the moment the collection is suffering a fall. The main measures regard the IPI (Excise Tax): the decrease of the rate on cars, regulated in December, was extended for three months, and 30 basic items of building material had also had their rates cut for the same period. In addition to that, the tax rate of the Cofins (Social Security Financing Contribution) on motorcycles, and five other sectors will be allowed to be installed at the Zona Franca de Manaus (Duty-Free Zone of Manaus), and take advantage of the tax benefits.
The Minister of Finance, Guido Mantega, explained the Government decided to increase the IPI and the PIS/Cofins on cigarettes hoping this increase in collection can offset the losses caused by the release. The cheaper packs of cigarette will have an average increase of 20%. The most expensive ones, 25%. In the case of the extension of the IPI cut for cars and trucks, it was negotiated among the Government, makers and unions the freezing of the layoffs in return for the benefit for as long as it lasts. Even temporary employment contracts will not be allowed to be terminated before their final terms. Nonetheless, voluntary dismissal programs are allowed.