Brazil's mining sector steps up efforts to change tax reform proposal

Brazilian mining association Ibram is resuming efforts to avoid a potential tax increase as part of the tax reform currently being debated in the senate.

The reform passed the lower house in July and is aimed at simplifying the system but would also empower states to impose taxes on primary and semi-finished products to finance infrastructure and housing. Mining, oil, gas and agricultural representatives claim this aspect would be detrimental.

"Ibram assesses that maintaining the article will seriously compromise both the competitiveness and performance of companies affected by the text and their contribution to the country's GDP," the association said in a statement.  

"When the tax reform was approved by the lower house, without as much controversy as expected, there was optimism that the reform would be quickly approved by the senate. But this climate of optimism is reversing, due to the rush of groups organized against various points of the reform," André Pereira César, a political analyst at Hold Consultoria, told BNamericas.

If the senate modifies aspects of the proposal, final approval will be delayed as the changes will have to be debated in the lower house in new sessions.

"It is almost certain that the senate will make changes to the reform approved by the lower house, so we will still see a long way to go before the final approval of this reform and it is possible that we will even see these discussions moving into next year," said César.

Ibram president Raul Jungmann (pictured, center) and vice president Fernando Azevedo e Silva (right) met with the bill’s rapporteur in the senate, Eduardo Braga (left), to talk about the new state powers. Braga is planning to present his report later this month and expects the senate to vote on the reform before November 9, his spokesperson told BNamericas.

"I think it's unlikely that the article will fall in the senate, due to the great influence of state governments, so my suggestion to mining companies and agricultural firms is that they at least make some demands to avoid cumulative calculation for taxes," Paulo Honório de Castro Júnior, head of tax issues at the William Freire Advogados law firm and president of Minas Gerais tax law association IMDT, told BNamericas.

"The way the reform is, I see it as a negative scenario for the entire export sector, not just mining," he added. 

On the other hand, local governments want to avoid lower tax collection due to the reform. 

"If many extraordinary measures are inserted into the tax reform, benefiting multiple sides, the approved reform would lose quality and not have the desired impact at the origin of the discussions," Luciano Rostagno, chief Latin America strategist at Banco Mizuho do Brasil, told BNamericas.