Tax: Automakers defend incentives in the Northeast – 12/06/2023 – Market

Companies covered by the automotive regime that grants incentives to those who produce in the Northeast and Central-West regions are starting a new offensive to maintain the benefits provided for in the Tax Reform.

This Thursday (7), the groups Stellantis (which produces Fiat, Jeep and RAM models in Pernambuco), Caoa (Chery and Hyundai in Goiás) and HPE (Mitsubishi in Goiás) sign an open letter published in several newspapers — including this one Sheet— in which they defend tax exemptions.

The publication takes place on the eve of the new vote on Tax Reform in the Chamber of Deputies. There is still no set date for the analysis of the text in the plenary, but the expectation is that changes to the consumption tax system will be enacted this year.

“We are tracing the path that the country will follow towards economic growth and social well-being”, says the text. “It is the opportunity to lay the foundations of a Brazil in which all regions are productive and generate development.”

The text also says that the development process provided by the automotive regime should not be interrupted until it “reaches maturity”.

The benefiting companies were avoiding talking about the topic after successfully voting in the Senate on Tax Reform, held in November.

Previously, the extension of incentives had been blocked in the Chamber, due to end in 2025. But then came the possibility of including the extension in the country’s new fiscal rules.

Automakers located in the South and Southeast regions even agreed to a possible extension of the exemptions until 2032, as there was a clause providing for a limitation: only electrified cars would be covered. This would solve the problem for BYD, which had already confirmed production in Bahia.

But the game changed again on the eve of the vote on the reform in the Senate. An article included at the last minute added conventional flex-fuel cars to the rule, and the most favored company was Stellantis. Then the first letter came, on November 8th.

“We need the immediate exclusion of paragraphs 3, 4 and 5 of article 19 of the Tax Reform, which represent a setback from a technological and environmental point of view, in addition to a tax waiver detrimental to the country’s development”, said the joint text released by the automakers GM, Toyota and Volkswagen.

The companies argue that, despite the greater expenditure on logistics, Stellantis’ production in the Northeast region allows for a cost reduction of approximately 20% compared to companies located in the South and Southeast regions.

The discussion heats up again with the approach of the new vote on Tax Reform in the Chamber. Rivals nicknamed the Northeast’s automotive regime “Bolsa Fiat”, in reference to the group’s main brand.

Stellantis defends itself with data on the generation of resources from production in the Pernambuco city of Goiana. In an internal document to which Folha had access, there is a list of contributions distributed across different regions.

According to the company, the Goiana hub handled a total of R$20 billion in purchases of components from suppliers across the country in 2022.

The expenses were distributed as follows: R$6.2 billion in Pernambuco, R$6 billion in Minas Gerais, R$5 billion in São Paulo, R$1.2 billion in the South region, R$1.1 billion in Rio de Janeiro and R$341 million in Bahia.

Stellantis states in its document that it has not remitted dividends to the parent company since 2014, when it was not yet a beneficiary of the incentive. “From 2015 [ano do início de atividades do Polo Automotivo de Pernambuco] By 2023, almost R$30 billion in investment inflows had been made in the plants in Minas Gerais and Pernambuco.”

The company also states that sales of products made in Goiana generate R$2 billion in ICMS for other states.

Regarding the tax benefits received by the Stellantis group, the main one is the 75% reduction in the amount to be paid in income tax.

In 2019, this tax incentive represented approximately R$5 billion, according to the automaker’s calculation. The value has been reduced in the last two years due to the pandemic, but new numbers have not been revealed.