An old discussion in Brazil is about the impact of taxes on the final price of a 0km car, and it has come back to the forefront with the stoppage in the production line of some manufacturers and the drop in sales.
With the price of cars up there and their marketing going in the opposite direction, finding a solution to this equation doesn't seem to be easy, since other factors are also involved, such as the interest rate and the automakers with their high profit margin.
Half the price of the car is tax?
The information that the value of a 0km car in Brazil is made up of about 50% taxes has started to circulate again in the social networks. Is this information true?
According to André Félix Ricotta de Oliveira, professor with a doctorate in tax law and coordinator of the course Taxation on Consumption at IBET (Brazilian Institute of Tax Studies), taxation is high and close to what we see in publications on Instagram and Twitter, for example.
"In Brazil, it is difficult to determine the true tax burden that is levied on consumption and operations with goods and services. According to the Receita Federal, taxation on goods and services corresponds to about 45% of what is collected in the country. On vehicles, there are studies that show that the tax burden varies from 30% to 49% depending on the model and where it is produced. For the imported car, this tax is much higher, and can reach 79% of the vehicle's value", he explained.
What taxes are levied on a new car?
The main taxes levied on a car sold in Brazil are: the Tax on Industrialized Product (IPI), the Tax on Circulation of Goods and Services (ICMS), the Social Integration Program (PIS), and the Contribution to Finance Social Security (COFINS). Tax Law specialist Katia Gutierres brings the details of taxation.
"The ICMS, for example, which is a state tax, varies according to the state. Besides this, the IPI tax rate varies according to the car's cylinder capacity and the fuel it uses, ranging from 7% to 25%. For vehicles powered only by gasoline and with engines over 2.0 the IPI rate, for example, is 25%", he said.
Can tax reform bring some relief?
With the resumption of the discussion on tax reform, the main proposals under discussion should meet the desire of entrepreneurs. "Both PEC 110 and PEC 45, in general, would have the effect of simplifying the taxation of the sector. Chain taxation is the main criticism of the automobile industry, which we are trying to solve by unifying consumption taxation in a value-added tax ('VAT'), and this is one of the points of convergence of the two proposals," analyzed Gutierres.
Manufacturers Expect Government Incentives?
Regarding the production line shutdowns of some companies, such as GM, Stellantis and Hyundai, are the automakers waiting for an incentive from the federal government to start producing at full force again?
"This question is difficult to answer. But, what is understood is that the market is not warm because there is a lack of buyers and the automotive companies have high stock, so they have given collective vacations, thus avoiding reducing the price of cars to lower the stock," said André Félix Ricotta de Oliveira.
As for Katia Gutierres, the arrival of an incentive for automakers may be a question of time. "Without a doubt. The concession of tax incentives to the automobile sector in times of economic crisis is historically constant in Brazil and we have been following in the media the opening of a dialogue between the current Government and the sector".
Source: IstoÉ Dinheiro.
