Brazil’s New President to make economic changes

Brazil’s newly elected President Luiz Inacio Lula da Silva plans to end the industrial tax IPI, according to Vice President Geraldo Alckmin. The IPI tax is imposed on companies that manufacture and import products such as refrigerators, cars, air conditioners, and televisions. The tax rate can be adjusted by presidential decree without the need for congressional approval.

Alckmin, who also serves as Lula’s minister of industry and trade, said that the current administration had considered reversing the 35% IPI tax reduction implemented by former President Jair Bolsonaro. However, this idea was abandoned due to resistance from industrialists who argued that it would increase production costs. Bolsonaro had cut the IPI by 35% last year in an effort to boost economic activity that had been negatively impacted by the COVID-19 pandemic. During his presidential campaign, he had promised to zero the tax rate.

On the other hand, Lula, who won the election by a narrow margin, did not mention reducing the IPI tax as a priority. In fact, his finance minister, Fernando Haddad, even discussed the possibility of ending Bolsonaro’s tax reduction, which would have increased government revenues by 9 billion reais ($1.8 billion). When Haddad announced a package to boost revenue and cut expenses last week, he did not propose any changes to the IPI rate. He also criticized the Bolsonaro administration for promoting a series of tax exemptions without pointing out compensations.

Lastly, Alckmin also stated that Lula does not intend to revoke Brazil’s labor and pension reforms, which were passed by Congress in 2017 and 2019 and are seen as market-friendly. In conclusion, Lula’s administration plans to end the industrial tax IPI, while also not reversing the tax reductions implemented by former President Bolsonaro. Additionally, Lula’s administration will not revoke the labor and pension reform that were passed by Congress in 2017 and 2019. The government will now push for tax reform in Brazil, which is essential to industry.