One decree published in the late afternoon of today (24) in an extraordinary edition of Official Diary of the Union restored the rates of Tax on Industrialized Products (IPI) for 109 products manufactured in the Manaus Free Trade Zone. The measure responds to recent decisions by the Minister of the Federal Supreme Court (STF) Alexandre de Moraes, who suspended parts of three decrees that cut the IPI by 35% on most products manufactured in the country.
According to the Ministry of Economy, the new decree increased to 170 the number of products from the Manaus Free Trade Zone that had their rates restored. Among the items are soda syrup, lighter, battery charger, razor, cash register, wristwatch, ballpoint pen and dishwasher.
Moraes responded to a request from companies in the Free Zone, which claimed that the IPI cut would make the activity in the region unfeasible. As companies located in the Free Zone are exempt from IPI and generate tax credits (right to reimbursement), the reduction of rates across the country takes away the competitive advantage of the industrial hub.
According to the Ministry of Economy, the increase in rates on most products has a neutral fiscal impact. The exception is concentrated beverage syrups, which are subject to a special IPI regime. Restoring the rates of these products will cost the government BRL 164.3 million in 2022, BRL 715.4 million in 2023 and BRL 761.7 million in 2024.
Historic
Since the beginning of the year, the government has exempted the IPI tax throughout the country, as a measure to stimulate the economy. In February, the cut had been 25%, but it was expanded to 35% in may. This expansion created friction between the government and businessmen in the Manaus Free Trade Zone.
More than once, Alexandre de Moraes reversed the measure for items produced in the region. In May, the STF minister suspended the effects for products manufactured in the Manaus Free Trade Zone of three decrees that reduced the tax, in response to actions by the government of Amazonas and the Solidarity party.
At the end of July, the government issued a decree which suspended the IPI cut for 61 products manufactured in the Free Zone. At the time, the Ministry of Economy had informed that the measure would help “preserve practically all the effective production of the Manaus Free Trade Zone”.
Parliamentarians from Amazonas and businessmen, however, argued that the decree did not address the needs of the industrial hub and brought legal uncertainty. On the 8th, Alexandre de Moraes granted a new decision, in which he suspended the 35% cut for items manufactured in the Free Zone. According to the minister, the decree at the end of July continued to “linearly reduce the IPI on hundreds of products produced in the Manaus Free Trade Zone”.
In a note, the Ministry of Economy reported that the decree issued today resolves the legal impasse, reducing taxes for the industry and, at the same time, guaranteeing the competitiveness of the Manaus Free Zone. “The text guarantees progress in tax relief measures, with positive effects on the country’s Gross Domestic Product and on the competitiveness of the industry”, highlighted the ministry.
Several products continue with the 35% cut in the IPI. Among these items are: refrigerators, kitchen stoves, cleaning products, metallurgical inputs (steel, copper, aluminum, etc.), furniture, chocolates, ice cream, beers, wines and tires.
*Material updated at 10:17 pm to add the list of products that continue with the IPI cut.
