Toyota criticizes tax benefit for Central-West region
The Brazilian Senate approved Tuesday, by 67 votes to 4, Provisional Measure 987, which included the Central-West region among those contemplated with the extension of tax benefits to automotive companies until 2025. The measure now has to be sanctioned by the president.
Originally, the MP was intended only for the North and Northeast, extending the deadline for companies in the sector in these regions to present projects for new cars to rely on presumed credit from the Tax on Industrialized Products (IPI).
The extension of the regime in the Central-West is not foreseen in the 2021 Budget sent by the government, but Goiás Governor Ronaldo Caiado (Democrats, DEM) negotiated with the economic team the collection of Financial Operation Tax (IOF) on credit operations with resources from the Constitutional Fund of the Central-West. The incentive for automakers in the Central-West region costs R$450 million per year.
The extension of the tax break in Goiás for Grupo Caoa, producer under license of brands Chery and Hyundai, and Mitsubishi uneven competition, undermines investments and goes against the discussion of reducing federal expenses to fund a new version of social program Bolsa Família, Toyota told Valor."There is no predictability whatsoever, this stops investments from all companies. Planning to launch a car takes five years. How am I going to define the project and investment for 2025 today if I don't know if my competitor will have an incentive or not?" says Toyota's Head of Government Affairs Roberto Braun.
The public statement by Toyota, which has factories in the State of São Paulo, is something rare in the sector and shows the severity of the disagreement in the sector. According to Mr. Braun, companies already receive state tax incentives to build factories in the Northeast and Central-West regions and, with the federal tax exemption, they end up unbalancing the competition within this market.
"A R$100,000 car produced in the Central-West has a reduction of R$13,000 in taxes. If it is in the Northeast, the incentive is R$21,000," Mr. Braun says. "They manage to [use this] to reduce a lot the price and still increase the profit. A customer already considers buying a different car because of a difference [in price] of R$2,000 or R$3,000, can you imagine R$10,000."
The executive reasoned that the incentive would make sense in the beginning, to attract carmakers to regions far away from large consumer centers, but these type of...
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