By Ben Tavener, Senior Contributing Reporter
RIO DE JANEIRO, BRAZIL – The reduction in the tax on industrialized products, known as IPI (Imposto sobre Produtos Industrializados), that was brought in to encourage spending on cars and domestic white goods, such as ovens and refrigerators, to jump-start growth in the Brazilian economy is set to end this Friday, August 31st.
Pressure from companies and influential business figures has been mounting on the government to extend the program, and a meeting is said to have been scheduled this week to discuss the matter.
Businesses were banking on bumper “final weekend” sales, pre-advertising the planned end of the lower rate of IPI to customers and piling on extra incentives to entice shoppers to take advantage.
If the regular rate of IPI is reinstated, then for cars with smaller engines (up to 1000cc) assembled in Brazil, for instance, the zero rate currently levied will go back to seven percent, and bigger gas-only cars (1000-2000cc) will go from 6.5 to 13 percent.
The equivalent tax bands for cars made outside Mercosur and Mexico will increase from 30 to 37 percent, and from 36.5 to 41 percent, respectively.
As for domestic appliances, washing machines will have twenty percent IPI instead of ten, stoves will rise from 0 to 4 percent, and refrigerators will see an increase in the tax from 5 to 15 percent.
The reduction for appliances was first announced by in 2009 and then re-implemented last year and renewed twice this year. The reduction was introduced for cars when the financial crisis first struck, and then later reintroduced in May 2012, with big increases for sales forecourts and domestic production lines.
The government has traditionally seen reductions in tax as a way to spur the economy and increase growth, and also to counter the effects of the international financial crisis.
Read more (in Portuguese).
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