Zona Franca considers fund provided for tax reform insufficient and insists on incentives – 04/16/2023 – Market

Conceived as a way of compensating for the possible loss of revenue caused by the tax reform, the regional development fund foreseen in the discussions is seen by members of the Manaus Free Trade Zone as insufficient to guarantee the competitiveness of the area in relation to other regions of the country.

In their assessment, the best way to ensure the attractiveness of the industrial hub would be to maintain the current tax incentives, while a long-term alternative is studied that allows expanding the economic matrices of Amazonas and other states of the Free Zone.

Amazonas State Secretary of Finance, Alex Del Giglio says that the regional development fund is not enough to guarantee the Free Zone. “The fund would only guarantee revenue for Amazonas, and we need much more than revenue. We need jobs and income”, he said.

According to him, it is necessary to maintain the model of the industrial center of Manaus while alternatives to it are studied. “The Midwest took almost 30, 40 years to manage to shape all the agricultural part, because the soil was not favorable. In the case of Amazonas it is worse, because we cannot think about agriculture because it will deforest the forest”, he said.

“I think that [pensar em opções] It will only happen if we maintain the model of the Manaus industrial plan and, at the same time, create other alternatives to expand the state’s economic matrix.”

Del Giglio also pointed out that, if in agribusiness the compensation of the tax incentive is sufficient, for Amazonas the equation would be more intricate. “Why do you have to combine employment, income and even state revenue.”

The Manaus Free Trade Zone was created in 1967, during the military dictatorship, to help develop the Amazon region. The industrial hub provides for exemption or reduction of import tax and exemption or credit for IPI (Tax on Industrialized Products), among other incentives.

Initially, the benefits would be maintained for 25 years from the 1988 Constitution —that is, they would end in 2013. The period was extended with the enactment of amendments and, now, the Free Zone is in force until 2073.

Messing with local tax incentives is a sensitive issue for the government, which has a critical discourse on the exceptions in the reform, but is cautious when dealing with the end of benefits in the area due to the resistance of the states in the North region —shortly after being appointed Minister of Finance , Fernando Haddad said that the Free Zone had specificity and sensitive policies to be considered.

The difficulties were evident during the technical visit made to the Manaus Free Trade Zone by the working group that discusses the tax reform in the Chamber. The entourage, which included the text’s rapporteur, Aguinaldo Ribeiro (PP-PB), and the collegiate coordinator, Reginaldo Lopes (PT-MG), heard a series of speeches pro-maintaining tax incentives for the area.

At the end of a visit to the Honda motorcycle factory, the governor of Amazonas, Wilson Lima (União Brasil), defended the benefits. “There are many people who say: ‘Oh, don’t worry that the incentives in the Manaus Free Trade Zone are maintained’. But it’s no use just saying that. It’s necessary to know how this is going to be maintained, because the State of Amazonas has a differentiated logistics from any other part of the world,” he said.

He exemplified with the case of a motorcycle with a production cost of R$ 1,000. “There is no way to have the same production cost as in São Paulo. Because if the motorcycle also costs R$ 1,000 in São Paulo, the entrepreneur will do the math. If there he delivers in 8 hours and here in Amazonas it takes 17 days to deliver to the consumer market, it is logical that he will move to the state of São Paulo.”

Among the parliamentarians of Amazonas, the speech follows the same line. Deputy Sidney Leite (PSD) highlights the highest cost in the state.

“We have to find a solution by listening to the productive sector, the state government and discussing with the tax reform department of the Ministry of Economy so that we can maintain the companies’ comparative advantages. industry here,” he said.

For Saullo Vianna (União Brasil), the reform is an opportunity to guarantee more jobs and legal security for investments. “And, above all, to reduce social inequalities, which make the poorest commit their income more to paying taxes than the richest.”

The tone of caution also permeates the speech of the group coordinator. “We have a great challenge and the rapporteur has this task of carrying out a reform for the country, which allows Brazil to develop the industrial sector, but, at the same time, it is evident that it has to look at regional issues”, stated Reginaldo Lopes. “Brazil needs to look at the particularities. And here is a consolidated model.”

Rapporteur of the text, Aguinaldo Ribeiro defended listening to regional particularities. “I am from the Northeast. Just as we have peculiarities here in the North, in the Northeast we also have peculiarities, in the South we have peculiarities”, he said.

However, he said, the best instrument to offset imbalances would be the regional development fund. “We have to have this look at regional development, whether here for the North region, or in the Northeast region, in the Midwest. We are a continental country. We are the sum of several countries with their marked differences”, he said. .

*The reporter traveled at the invitation of the working group and the government of Amazonas