Brazil raises taxes on beer, brewers, but hike less than expected

Fri Sep 28, 2012 9:50pm EDT

* Beer prices seen rising 2.15 pct on Monday

* Proposed rates cut after job, investment pledge

* New taxes to make up for levy cuts for industry

BRASILIA, Sept 28 (Reuters) - Brazil will raise taxes on beer and brewers on Monday, part of plans to recover revenue lost when levies were cut on manufacturers earlier this year as part of a plan to kick-start the economy, Brazil's tax authority said on Friday.

The taxes are expected to cause the retail price of beer to rise an average 2.15 percent on Monday, Carlos Alberto Barreto, head of the tax agency, told reporters in Brasilia.

The tax increase, though, will be less than expected after the government agreed to reductions in proposed rates. In exchange brewers such as Anheuser-Busch Inbev SA agreed to employment and investment targets.

Brazil's government in April slashed taxes on a wide range of products and reduced levies and payroll taxes on companies in the auto, textile, plastics and other industries in an effort to kick-start an economy that slowed to a near-standstill last year.

To make up for some of the lost revenue, the government said it would raise taxes on beer, alcohol and tobacco.

The tax on a can or bottle of beer will rise to 10.5 percent, less than the originally proposed 10.93. The industrialized products tax and two social levies will rise by 2 percent every six months for six years.

Previously the government had sought to raise taxes by 6.25 percent a year for four years.

By reducing its initial proposals the government will forgo 76.3 million reais ($37.6 million) this year and 401.1 million in 2013.

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