Brazilian government moves to reduce capital equipment tax
The Brazilian Federal Government has reduced its Tax on Industrialised Products (IPI) in relation to 643 different types of manufacturing equipment. Two main reductions have been implemented, from 5% to 3.5% and from 12% to 8%.
The reductions have been taken as part of the government's Policy for Industry, Technology and Foreign Trade which includes the complete phasing out of the tax by 2006. The sectors to which the reductions apply were selected according to their potential to generate employment, increase exports and improve local infrastructure. Some machines were also chosen for their potential to enhance the competitiveness of small and medium-sized companies and contribute to the modernisation of those businesses. The leather and shoe, plastics and textile industries are among those industries to which the tax applies.
Prior to the reduction,
Commenting on the reduction, Gisele Garcez, managing secretary of ABRAMEQ - Brazilian Association of Manufacturers of Machines and Equipment for the Leather and Shoe Industry – said that because some components such as valves were covered by the tax reduction, he expected his members’ products to become more competitive in the international market, and for foreign investment to be encouraged.
