BRASILIA Dec 24 The Brazilian government said
on Tuesday it will gradually roll back tax breaks on cars next
year, amid worries from producers that higher duties could hit
sales in the South American country.
The government had previously announced it planned to return
the industrial products tax, known as IPI, charged on cars and
other products to the normal level as a way to make up for the
billions of dollars in lost revenue that severely deteriorated
Brazil's finances this year.
However, the government decided to raise the IPI tax on
basic passenger cars to 3 percent from 2 percent starting in
January, instead of an immediate return to the original rate of
7 percent as expected by many analysts.
Deputy Finance Minister Dyogo de Oliveira told reporters
that in late June the government will analyze whether it will
raise the tax back to 7 percent. He said the tax increase will
depend on market conditions at that time.
In 2012, the government temporarily lowered the IPI tax on
cars, furniture and home appliances in an attempt to jump start
an economy that has struggled to grow in the past three years.
The increase in the IPI tax for both cars and furniture will
mean an extra 1.146 billion reais ($482.91 million)in tax
revenues until June 30, de Oliveira said.
Car makers in Brazil are worried that higher taxes and new
obligatory safety standards will increase the value of cars and
reduce sales in the world's fourth largest auto market.
Auto sales in Brazil are on track to shrink this year for
the first time in a decade, as credit gets tighter and the
government gradually winds down its stimulus.
Italy's Fiat SpA, Germany's Volkswagen AG
and U.S.-based General Motors Co and Ford
Motor Co sell more than 70 percent of new cars in Brazil.
De Oliveira said the government had not calculated the
impact higher taxes would have on inflation, but said he did not
expected the price transmission to be immediate.