Tax hikes cause concern
Rui Bergesch, director of Fiscal Matters Department at the Association of the Leather Industry of Rio Grande do Sul (AICSul), has voiced grave concerns over state government proposals to increase VAT, which could seriously affect the leather industry in the state, the largest producer of finished leather in Brazil.
According to Mr Bergesch, tax increases would only lead to higher costs for leather manufacturers and could cause job losses at a time when the low US dollar exchange rate is already badly affecting international competitiveness and profitability.
He also harshly criticized the current restrictions imposed on refunding VAT on export credits on raw materials bought in other states, stating that due to these restrictions, which will remain in force until 2009, the local government has retained R$80 million ($44 million) in credit. He claimed that with the new proposals this figure will certainly increase making it extremely difficult for tanneries to operate profitably; especially as 85% of hides processed in the state come from other Brazilian states.
Some 16,000 people are employed in the leather in industry in Rio Grande do Sul and the state turns over approximately R$2 billion ($1 billion) per year.
