Popular car: exemption can cost up to BRL 990 million – 05/26/2023 – Market

The cut in federal taxes to encourage the purchase of cars up to R$ 120,000 could cost up to R$ 990 million by the end of this year, according to government interlocutors interviewed by the Sheet.

If the program lasts less than four months, the cost would be around R$560 million, according to preliminary estimates.

The numbers are still being closed and depend on what the government gets from compensation measures, to meet the requirements of the LRF (Fiscal Responsibility Law).

The measure was announced this Thursday (25) by Vice President Geraldo Alckmin (PSB), who is also Minister of Development, Industry, Commerce and Services. According to him, the rates of IPI (Tax on Industrialized Products) and PIS/Cofins will be reduced.

The acts, however, are still in the debate and elaboration phase. In technical discussions, there are also negotiations to reduce the IOF (Financial Operations Tax) on vehicle financing.

IPI and IOF are regulatory taxes, which means that the government can cut their rates without the need for a compensation measure. The reduction of PIS/Cofins demands the simultaneous presentation of another initiative to replace the lost collection.

One of the calculations presented by the MDIC to the Ministry of Finance indicated a cost of BRL 819 million just with the reduction in the collection of IPI and IOF for seven months – around BRL 117 million per month.

A group within the government mentions the possibility of the discount falling only on these two taxes, given the difficulty of finding a compensatory measure for the cut in PIS/Cofins. Another wing, however, says that the intention remains to also give discounts on PIS/Cofins, as announced.

According to an interlocutor of the economic team, the design of the actions is still being finalized and will be “the possible” according to the “available value”.

Minister Fernando Haddad (Finance) said, in an interview with GloboNews, that the program should last “three or four months”. MDIC’s initial wish was for the program to extend until the end of the year, but the portfolio is open to negotiating a shorter period.

The measure is seen as an anti-cyclical policy, capable of helping to boost economic activity in a time of slowdown.

There is even an argument that boosting sales can reduce the impact on accounts. As the discount is not full on taxes, the MDIC calculates that the increase in sales can provide a revenue gain.

The calculation was made as a way of presenting a favorable argument for the incentive, although this revenue projection cannot be used as legal compensation for the purposes of the LRF.

The package announced by the government wants to reduce the price of entry-level cars to less than R$60,000. Today, the cheapest model sold in Brazil is the Renault Kwid in the Zen version, which costs R$69,000.

The discounts will take into account three factors and may reach up to 10.96% of the vehicle’s value: the domestic production of parts, energy efficiency and the price of the car.

The Ministry of Finance has a period of 15 days to present the details of the package, but Haddad has already indicated that he intends to complete the negotiations before then.

The hope of Anfavea (National Association of Motor Vehicle Manufacturers) is that the package lasts for 12 months, but the Treasury indicated that it should last less.