Tax Incentives and the Resumption


of Growth in Brazil No one doubts that the BRICs (the four emerging countries with the highest growth potential in the world: Brazil, Russia, India and China) play an important role in the global crisis scenario. Studies show that over the next 40 years these countries will be of the same importance as the G6 countries in the global economy.


It has also been strongly suggested that Brazil is not growing as much as the other BRIC countries, with the estimated rate for 2012 being approximately 1.90%, according to the government statistics. However, it is noteworthy that Brazil began to grow before other BRICs, and that this lower rate of development is therefore somewhat natural in the process of stabilisation, coupled with crisis and global recession.


On the other hand, the Federal Government and State Governments have shown efforts to keep the economy heated up. The effort that the Federal Government is putting in to controlling inflation and lowering interest rates, through the initiatives of the Public, Federal and State Banks, is contributing much to that money becoming more accessible in the productive sector. This enables companies produce more, thus generating more consumption and jobs, which are necessary for a resumption of GDP growth.


Other important fronts that the Federal and State Governments are developing in favour of industry are related to tax incentives. The President Dilma Russef said during an interview in London on 27th July that "We give tax and financial incentives, and we want a return for the entire country, not just for the government, in order to maintain employment. So we are always looking at this. There is no chronology. To the extent that these incentives happen, it is absolutely right that the government follows up the maintenance of jobs. In fact, we give only the incentives and we do all policy anti-cyclical focused on growth to ensure the job, is not for something else," she said. This was published in Blog Plateau.


The tax incentives are part of the set of economic policies that aim to facilitate the injections of money in certain sectors, by charging less tax or its non-recovery for the economic boom of the Brazilian territory.


Brazil currently has several tax incentives, many of them focusing on industry, but without undermining the value of other important sectors for the country.


An example is the IT sector, which plays a strategic role in the economic and social development of the nation. The modernisation of industries, the computerisation of schools, security systems for online banking, improving and streamlining public services and tax automation, among others, are changes that are dependent on IT.


Among the incentives in this sector, we highlight the Law of Good, that was born of Law No. 11.196/2005 that aims for a spending decrease on innovation by granting subsidies from the federal government by reducing the amount of


Income Tax (IRPJ), and Contribution on Net Profit (CSLL).


We also have: the (REPES) aimed at promoting exports of IT, through the tax exemption on the import of goods necessary for software development or IT services that will be exported; the law of training staff, which aims to relieve costs of the education and training of IT professionals, by deducting double the base for calculating the IRPJ / CSLL; the payroll tax reduction, whose INSS shall be calculated on sales and not on the payroll; and the Simple National, where various activities of the IT sector are included in the list of services, allowed the option for Simple National.


It is worth mentioning that the Chamber of Deputies grants tax incentives for various industries. The Chamber was passed on 16th July 2012, with 299 votes in favor, and none opposed the Provisional Measure (MP) 563 which includes the Plan "Brazil Greater".


The MP 563 establishes differentiated tax regimes, exempts and products and the payroll of some sectors. It will benefit from the exemption from the payroll in exchange for a percentage of gross revenue, the sectors of hotels, furniture, automotive, naval, air and call center companies and designs of integrated circuits (chips).


The MP also creates a special tax regime of the Program National Broadband for the deployment, expansion and modernisation of telecommunications networks for connections to broadband Internet, besides the reduction in the rate of employer social security contribution of service industries and processing industry.


Furthermore, the MP provides for the creation of the Incentive Program for Technological Innovation and strengthen of the Productive Chain of Motor Vehicles (Self-Innovation), with presumed IPI credit to qualified companies with activities in the country.


Finally, there is a device that expands the scope of tax incentives to exporters. Becomes required that 50% of the gross revenue arising out of export sales abroad, and no more than 70%.


In the same way as the state governments across the country are creating or enhancing their Laws State Tax Incentive, several productive sectors (pharmaceuticals, cosmetics, plastics, automotive, resins, etc.) benefit from significant reductions in ICMS tax (Services Tax over Merchandise Circulation), not only in purchasing raw materials, but mainly in the sale of the final product. These reductions in ICMS tax, legally granted by the states, can often reflect a saving of up to 85% (eighty five percent) of the ICMS tax paid normally.


As we have seen, the Federal Government and State Governments have demonstrated that they


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are engaged in maintaining the country's productive sector, compared to the global crisis, although we understand that there is still room to implement effective measures to further relieve the productive sector.


The effective reduction of tax burden, update the CLT (Consolidation of Labor Laws), greater access to credit lines for investment, the higher interest rate reduction for investments in the productive sector are measures that can still be granted and that certainly leverage further growth of the country.


If on one hand the Government creates measures to encourage the growth of the country, the other institutions linked to the entrepreneurs should do their part. We have awareness that the Chamber of Mercosur has an important role as an institution to contribute to the country's economic growth by supporting the productive sector to promote business.


Constantly we do business round, the commercial exchange international missions that want to do business with Brazilian businessmen, always to strengthen and promote the export of domestic products, help the growth of the international network of businesses, encourage the participation of companies in the market potential represented by MERCOSUR and the Americas, we also sell products through the attacked online store site, and we act as export and import trade, through our trading environment for business that have no System for Registration and Track-down of Customs Agents' Activities (RADAR).


The Chamber of Commerce and Industry of Mercosur and the Americas will continue its strong performance in favour of economic interests of employers through measures to strengthen commercial ties between businessmen from around the world, as well as an important interlocutor between the desires of the productive sector and along with Federal and State Governments. We will continue presenting ideas and supporting initiatives that are beneficial for strengthening the economic sector of Brazil and consequently for all Mercosur.


Rogerio Lino Pereira – Director of Corporate Operations of the Chamber Mercosur.


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