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Sector requests a government solution to improve competitiveness and avoid further deindustrialization process during a period of economic slowdown

The tax burden for the manufacturing industry accounted for 45.4% of Gross Domestic Product (GDP) in the sector in 2012, which reduces the profitability and helps to explain the process of de-industrialization through which the country has been going on. It is the largest share of revenues due to federal revenues between activities, as opposed to 5.4% of agricultural and mining and quarrying, according to the study The Tax Burden for the Manufacturing Industry, the Federation of Industries of Rio de Janeiro (Firjan). For the entity, it shows why it is more profitable to produce and export primary goods than industrialized ones in Brazil.

The survey was delivered by representatives of the Federation to the finance minister, Joaquim Levy, in January to ask for changes that allow the resumption of investment. Available information were used for the first time by the IRS, with open data of tax revenues according to the economic activities and according to the tax type.

The trade activity list is completed with 35.0% of GDP in taxes, and the services, construction and industrial services of public utility (Siup), with 17.6%. The national average is 23.6%, slightly more than half of what the industry pays in taxes.

For industry, the largest share is the Tax on Goods and Services (ICMS), with 37.3%. Following it appears the Social Integration Program and Contribution to Social Security Financing (PIS/Cofins), with 21.7%, contribution to the National Social Security Institute (INSS), with 13.2%, the tax on products industrial (IPI), with 7.0%, the Corporate Income Tax (CIT), with 5.1%, and Social Contribution on Net Income (CSL) with 2.5%. Other taxes totaled 13.3%.

The sector has the second highest weight in the ICMS, is the largest, well ahead in the PIS/Cofins and IPI and gets smaller in income tax and social contribution. The economics professor Sidnei Pereira do Nascimento, the State University of Londrina (UEL) says that the study of FIRJAN points out that there was increase in the collection of all taxes and drop in profitability and the industry's profitability as of 2009 compared to 2012 contained in the study. "The government's revenue from income tax and social contribution tax fell more than 20% because the industry is having a hard time keeping, although participation in the tax pie has increased from 38.3% to 45.4% in the period," he explains.

FIRJAN Proposal

The FIRJAN expert in Economic Development, William Figueiredo said that the tax burden on the industry distorts how to be more profitable to extract

oil or iron ore and export unprocessed, than producing gasoline or steel. In search of a quick fix, the proposal of the entity is the government relieves the rate of income tax and social contribution for the sector. Although both represent a small share of industrial tax costs, he says he would allow resources to spare to leverage investments at a time of the brakes of the economy. "Investing with entrepreneur's own capital is a feature of the domestic industry because the cost of capital is high in the country."

Figueiredo says that the current high rate of interest, with the Selic at 12.25%, hinders investment because the return is very slow. Especially with the low growth outlook for the next two years.

Asked whether the exemption on profits and income would result in more money invested in the economy or just larger box for the sector, the executive Firjan says it's the only way for the government to heat up the market quickly because a tax reform takes time. "Relieve the chain today is more difficult than relieve investments and if the government wants it in the short term, you must reduce the rates of income tax and social contribution."

Text: Fabio Galiotto - Location Report

Source: Folha de Londrina – folha web

Version: Grazielle Segeti 



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