Sou da Paz and Oxfam warn of loophole that could benefit weapons in Tax Reform – 10/06/2023 – What tax is this

The Sou da Paz Institute and Oxfam Brasil defend that the Senate removes the loophole from the Tax Reform that could result in reduced taxation for firearms.

According to the entities, a change in the text made by the Chamber of Deputies could reduce the rate on weapons from the current 75% in Rio de Janeiro and 63% in São Paulo to just 10%.

One of the articles of the reform lists the sectors that may have the rate reduced by 60%. If the general rate of new taxes is 25%, the beneficiaries would be taxed at 10%.

This list includes “goods and services related to national security and sovereignty, information security and cyber security”. This does not guarantee benefits for weapons, which would still depend on the approval of a bill explicitly mentioning these products.

“If it is not changed, PEC (Proposed Amendment to the Constitution) 45/2019 could offer even more tax benefits to the arms industry and increase the volume of weapons in circulation in a country where more than 70% of homicides are committed with this weapon. artifact and that gun injuries cost R$50 million to public coffers every year”, say the entities.

Products benefiting from a reduced rate also escape extra taxation with the Selective Tax, a type of “sin tax” that would be applied to “goods and services harmful to health or the environment”.

“The current wording of the Selective Tax does not guarantee that this tax will be applied to weapons and ammunition. Without the incidence of IS, weapons and ammunition would be taxed at the standard IBS and CBS rate, which, according to a technical note from the Ministry of Finance, should be around 25%.”

The demonstration was prepared based on a legal opinion from lawyers Luiza Machado Menezes and Daniela Olímpio de Oliveira, which points out the unconstitutionality of benefits to the weapons industry.

According to the document, despite several decrees on weapons having been revoked by President Lula, the IPI reduction for weapons and ammunition approved by former President Jair Bolsonaro from 45% to 29.25% for revolvers and pistols is still in effect.

“It is unacceptable that the tax reform in Congress considers a reduction in taxation on firearms. A healthy, supportive and sustainable tax reform, capable of reducing inequalities, cannot promote or encourage the population to arm themselves”, says Katia Maia, executive director from Oxfam Brazil.

“Taxation needs to be in line with constitutionally established values, principles and assets”, says Carolina Ricardo, executive director of Instituto Sou da Paz.

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