Spirits tell Padilha that I smuggle mine cachaça – 04/01/2024 – Panel SA

Almost R$13 billion in taxes were not paid last year due to the smuggling of distilled alcoholic beverages. This is the main argument that ABBD (Brazilian Distilled Beverages Association) presented to the economic team and Minister Alexandre Padilha (Institutional Relations) to demonstrate the need for a single tax rate for alcoholic beverages.

At the center of this debate is a tax war between beers and spirits. Today, beer —which has a low alcohol content, between 4% and 7%— collects less than whiskey, vodka or cachaça.

In regulating the tax reform, beer manufacturers argue that the situation should be preserved as it is: drinks with higher alcohol content should have a higher tax rate.

The ABBD (Brazilian Distilled Beverages Association) says that “alcohol is alcohol”, a motto it has been using to say that the tax rate must be the same for any type of drink, regardless of the alcohol content.

Today, beer pays less and, according to ABBD, this creates a market distortion, causing sales to be targeted, paving the way for the illegal consumption of distilled spirits, which cost more.

The survey, carried out by the Euromonitor institute, showed that, last year, 24% of vodkas sold in the country entered the country illegally. It is not known, of this total, how many were counterfeit. In the case of gin, the parallel market already represents 14% and, in the case of wine, 8%. Not even cachaça escaped — 19% of the market is supplied by illegal products, according to ABBD.

“The higher the market prices inflated by unreasonable taxation, the greater the profit premium (margin) for the practice of illegality”, says the document delivered to the government.

“This high profit margin attracts criminal organizations to this illegal activity, with already proven ‘crime as a service’ practices [o crime como serviço, em tradução livre] and broad use of its logistics and commercial chains for the distribution and sale of unsourced products. Regardless of the type of drink, alcohol is alcohol from a chemical perspective. From a tax point of view, treating the type of drink differently causes distortions in the market and a strong stimulus to the illegal market, with significant and harmful consequences for public health.”

According to people who participated in the meeting, the data raised awareness among the economic team, but it is not yet known what solution will be given.

Today, beer has a tax burden of 44% and spirits vary between 47% and 67%. This package includes the following taxes: PIS, Cofins, IPI, ICMS and ISS.

With the tax reform, there will be a single rate, the Selective Tax, resulting from the combination of CBS (combination of PIS, Cofins and IPI) and IBS (combination of ICMS and ISS).

With Diego Felix

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