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Jefferson José Rodrigues Chief of Economics Studies

Programa EUROsociAL Fiscalidade Estratégias Fiscais Ligadas à Coesão Social. Encontro de Especialistas em Política Tributára – Receita Federal e União Européia. PIS/COFINS and IPI. The Federal Consumption Taxes. Jefferson José Rodrigues Chief of Economics Studies.

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Jefferson José Rodrigues Chief of Economics Studies

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  1. Programa EUROsociAL Fiscalidade Estratégias Fiscais Ligadas à Coesão Social Encontro de Especialistas em Política Tributára – Receita Federal e União Européia PIS/COFINS and IPI The Federal Consumption Taxes Jefferson José Rodrigues Chief of Economics Studies Secretaria da Receita Federal Brasília – Brazil November 20-23, 2006

  2. General Aspects Brazilian Tax System

  3. PIS/COFINS Brief history • The Social Integration Program (PIS) was created in 1970 and had incidence on company's turnover at the rate of 0.65%. • The Contribution for the Financing of Social Security (Cofins) was created in 1982 and had incidence on company's turnover at the rate of 0.5%. Gradually, the rate was increased until achieving 3%, in 1999. • Along the years, there was a trend to converge the tax bases of the two contributions. Consequently, nowadays the tax rates are almost a simple addition.

  4. PIS/COFINS Features until 2003 • Until 2003, the PIS/Cofins were contributions with incidence on company's turnover. • The incidence was cumulative at total rate of 3.65%, with no incidence on imports and exports. • The financial sector was charged at the rate of 4.65% on the spread (the difference between the financial revenues and the interest rate a bank pays on deposits). • There were few exemptions, and some economic activities were charge in a single stage.

  5. PIS/COFINS Features after 2004 • Under the present rules, PIS/Cofins are hybrid contributions: for some economic activities, they are cumulative at total rate of 3.65%. For others, they are non-cumulative at total rate of 9.25%. • When they are non-cumulative, the tax basis is the difference between gross revenue and total deductible purchases. • Imports are charge at total rate of 9.25% and exports are exempt. • The financial sector is still charged at the rate of 4.65% on the spread (the difference between the financial revenues and the interest rate a bank pays on deposits).

  6. PIS/COFINS Features after 2004 • There are some exemptions, like capital goods and basic foods . There are more economic activities charged in a single stage. • In some cases, the buyer of a service must withhold at source the PIS/Cofins • The collection of PIS/Cofins is not shared with States and Municipalities. • The collection is directed to financing the social security system (health care, pension system and social assistance).

  7. 1.65% 5.40% (1983) (2005) PIS/COFINS PIS/Cofins Collection* Tax Collection (% of GDP) * Pasep included.

  8. PIS/COFINS PIS/Cofins Collection* % of Consumption Collection Relative Share (%) % of Federal Revenue Taxes * Pasep included.

  9. IPI Basic features • The Tax on Industrialized Products (IPI) replaced, in 1967, the federal consumption tax. • The IPI is a value-added tax only charged on the manufacturing stages (it is not charged on services). • The rates are defined under the harmonized system (several different brackets). • According to a constitutional rule, the IPI shall be selective, based on the essentiality of the product. • The highest brackets are levied on tobacco, alcoholic drinks, vehicles and luxury goods.

  10. IPI Basic features • Is levied on imports and is not levied on exports. • 57% of the collection is shared with States and Municipalities. • In the last few years, there has been a gradual exemption of capital goods. • It is an important tool of industrial policy of the federal government. The brackets may be changed by the executive power. • There are many programs of regional development based on the exemption of IPI (e.g. Zona Franca de Manaus).

  11. 2.52% 1.29% (1983) (2005) IPI IPI Collection Tax Collection (% of GDP)

  12. IPI IPI Collection % of Consumption Collection Relative Share (%) % of Federal Revenue Taxes

  13. 4.18% 6.70% (1983) (2005) PIS/COFINS + IPI Tax Collection Tax Collection (% of GDP)

  14. PIS/COFINS + IPI PIS/Cofins + IPI Collection* % of Consumption Collection Relative Share (%) % of Federal Revenue Taxes * Pasep included.

  15. CIDE - Combustíveis Basic features • The Economic Contribution on Fuel (CIDE Combustíveis) replaced, in 2002, a non-tax government revenue that was charged on fossil fuel and directed to a fund used do balance changes in the international price of oil. • It is charged in the refinery. The tax rate is specific (a fixed amount per liter of fuel). • The amount of the specific contribution is variable, according to the type of fuel.

  16. 0.56% 0.39% (2002) (2005) CIDE Combustíveis Tax Collection Tax Collection (% of GDP)

  17. Programa EUROsociAL Fiscalidade Estratégias Fiscais Ligadas à Coesão Social Encontro de Especialistas em Política Tributára – Receita Federal e União Européia PIS/COFINS and IPI The Federal Consumption Taxes Jefferson José Rodrigues Chief of Economics Studies Secretaria da Receita Federal Brasília – Brazil November 20-23, 2006

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