Tax reform: secretary talks about transition in the Free Zone with guaranteed employment and income, but exploring ‘regional vocations’

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Bernard Appy, Treasury Secretary Extraordinary Secretary for Tax Reform, participated in public hearings in the Chamber. The government intends to maintain tax benefits for the area, but the format is still under discussion. Tax reform challenges: Manaus Free Trade Zone The economic team is discussing with the government of Amazonas a “transition model” for the Manaus Free Trade Zone, in view of the proposed tax reform on consumption. The government says that the objective is to maintain the current level of employment and income generation, but with a better exploration of the “vocations” of the region. This information was provided this Wednesday (10th) by the extraordinary secretary of the Ministry of Finance for tax reform, Bernard Appy. He participated in public hearings in the Mines and Energy and National Integration, and Regional Development commissions of the Chamber of Deputies. “We are now discussing the transition model with the government of Amazonas. It is going very well, but it is not finished. We have a commitment as a ministry to make a transition that will not be traumatic for the companies that are there and that guarantees, in the medium and in the long term, the minimum generation of jobs and income that it generates today. If possible, with a model that explores regional vocations more than the current model”, declared Secretary Bernard Appy. The tax reform proposals being discussed in the National Congress include maintaining the benefits of the Manaus Free Trade Zone, currently granted by the exemption from the Tax on Industrialized Products (IPI) for products produced there. For this year alone, the waiver of taxes on account of the benefits for the Free Zone should exceed R$ 30 billion. The reform proposals, however, foresee the end of the IPI and its replacement by a selective tax. Thus, theoretically, this way of granting tax benefits to the Amazon region would be jeopardized. Last year, when the Bolsonaro government reduced the IPI, across the country, for products that were also manufactured in the Free Zone, the government of Amazonas appealed to the Federal Supreme Court (STF) – which reestablished the benefits, raising the tax again to other regions. Secretary Appy did not provide further details on how the benefit will be maintained for companies operating in the area, but informed that the transition to a new model will be “extremely smooth over time”. Rapporteur guarantees benefit In April, deputy Aguinaldo Ribeiro (PP-PB), rapporteur for the tax reform in the Chamber, stated that it is necessary to respect contracts and, therefore, defended the maintenance of the Manaus Free Trade Zone (ZFM) until 2073. of the report, the deputy will take into account two proposals that are being discussed in the National Congress: PEC 45 – Single VAT for the Union, states and municipalities, plus a selective tax (on harmful products). PEC 110 – Dual VAT, that is, a tax for states and municipalities, as well as another for the federal government, and also a selective tax (on harmful products). Manaus Free Trade Zone Created in 1967, the Free Trade Zone grants tax benefits to industries installed in the region, with the aim of promoting jobs and generating income in the Amazon. A survey by the Superintendence of the Manaus Free Trade Zone (Suframa), carried out in December 2021, points out that there are 100,047 jobs between permanent, temporary and outsourced workers. Representatives of the industrial sector in the region say that direct and indirect jobs add up to 500,000. According to the Manaus Free Trade Zone Superintendence (Suframa), the current economic development model comprises three poles: commercial, industrial and agricultural. The agency informs that the former had a greater rise until the end of the 1980s, and that the industrial center is considered, at this moment, the “support base” of the ZFM. Instituto Escolhas In October of last year, Sergio Leitão, executive director of Instituto Escolhas, a non-profit civil association that seeks to “qualify the debate on sustainability”, evaluated that the ZFM needs to be “dynamise” and “renovate”, because there are challenges that make it generate fewer jobs such as, for example, the robotization of production processes. He added that one third of the tax benefits granted by the federal government, that is, public resources, are used to finance the transport of inputs, from the South and Southeast of the country, to the Amazon region. When they arrive there, the products are assembled – sold mainly in other regions of the country. Leitão evaluated that it is a high cost to make a process without innovation. Sergio Leitão said that the bioeconomy, such as fish farming and vegetable meat projects, for example, are the region’s “passport to the future”. A study by Instituto Escolhas mentions the possibility of progress in the food, beverage, cosmetics, textile, energy and pharmaceutical sectors, among others. And it reveals that Banco da Amazônia has R$ 33.8 billion from the Constitutional Financing Fund of the North (FNO) that can be sought by entrepreneurs for these activities.

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