Most expensive beer? “Sin tax” will be defined by Congress

The text of the tax reform approved by the Chamber of Deputies provides for the institution of an additional selective tax on products considered harmful to health and the environment. It is the so-called “sin tax” that will certainly be applied to cigarettes and alcoholic beverages. Currently, these products already pay more taxes due to the inverted selectivity criterion, in which they are not included in the rate reduction of other items.

The definition of the range of products and services that will be surcharged, according to the degree of harmfulness, will be left to a supplementary law. Among the criteria for any heavier rates should be the alcohol content of the final product.

Thus, there is a probability that beer will end up being less surcharged than vodka, cachaça or whiskey, distillates that have a higher alcohol content. The beer appreciated by Brazilians, which has an average percentage of 5% alcohol, may be classified as “pecadinho”, receiving lower taxation than its heavyweight ethyl competitors.

Former president Jair Bolsonaro (PL) is critical of the excise tax. “Meat (picanha), fossil fuels, soft drinks, alcoholic beverages, among others, would be surcharged (…) , more unemployment and inflation,” he said.

High tax may favor black market

The beverage sector complains that it already pays high rates and that there is an optimal point for taxation that, if exceeded, will not result in an increase in revenue, it will only contribute to transferring consumption to the illegal market. A survey carried out by tax lawyer Samir Nemer for the Valor Econômico newspaper, last year, pointed out that beer taxation was around 55% of the final price, while the tax on caipirinha represented about 76% of its value. Of the price of mineral water, on the other hand, 37% represented taxes.

The World Health Organization has advocated raising taxes on alcoholic products, in a more symmetrical way to what is currently applied to tobacco. In Europe, more than half of the 53 countries apply a minimum tax of 75% on the final cigarette price. With regard to beverages, WHO argues that if there were a minimum tax share of 15% in the final price, it would be possible to save 130,000 lives each year.

“With regard to alcohol, taxation should be considered as a health measure, and not merely an economic tool. And very little has been done to treat alcohol with the same measures as tobacco,” says Carina Ferreira-Borges, director of a WHO alcohol and tobacco prevention program in Europe.

Price of some drinks already have 90% tax

In Brazil, taxation is already much higher than that applied in the Old Continent. Estimate of the Commercial Association of São Paulo, based on the tax meter, pointed out that in Brazil 62% of the price of draft beer comes from taxes, while this index reaches 82% of the price of cachaça. According to the Brazilian Beverage Association (Abrabe), some beverages already reach close to 90% of the tax burden and there would be no more room for raising the rates.

In addition to beer and alcohol, the tax reform targets other products with the selective tax, such as agricultural pesticides, vehicles that use a lot of fuel, and foods with an excess of sugar or salt.

To gain support from the agricultural caucus, however, the government agreed to exclude additional taxation on agrochemicals, which benefit from the reduced VAT rate of 60%. The sector’s argument is that it would not make sense to charge more for inputs that are essential to food production.

The food industry, on the other hand, promises to resist the adoption of a “sin tax” on sugary or ultra-processed foods, on the grounds that this taxation will mainly harm the poorest families. The impact on the price of food – largely transported by road – is also invoked by the Legal Combustible Institute (ICL) to defend the non-application of the selective tax on fossil fuels.