Brazilian economic stimulus plan: government to exempt payroll of companies and other tax exemption measures

The package of measures announced on Tuesday, April 3, by the federal government of Brazil totaled R$ 60.4 billion in tax exemptions, lines of credit and government purchases. Of this total, R$ 8 billion will be for a new line of funding to encourage research and innovation in the industry, which will offer credit at a reduced rate for investments. Another U.S. $ 4.7 billion will be for the companies facing difficulties with competitiveness with international competitors. The program that provides working capital for small and medium enterprises Progeren will have R$ 10 billion.

In the field of tax refusal, when the government gives up to receive taxes to encourage companies, the total would be R$ 3.1 billion. Among the main measures announced by the government, is the exemption of payroll for the purpose of the employer contribution from 20% to 15 industrial sectors, which will be replaced by a new rate of 1% to 2.5% on sales of businesses. The benefited sectors were the textile, garment, leather and footwear, furniture, plastics, electrical equipment, auto parts, buses, marine industry, airline industry, mechanical capital goods, hotels, information technology, call centers and design houses.

The new measures of the economic stimulus plan, announced by the government on Tuesday, help but do not solve the problems of competitiveness of the Brazilian industry. This is the opinion of the economists polled by BBC Brazil. For the economists, the benefit should be broader, encompassing also other sectors.

The government’s strategy is to reverse the slowdown in industrial activity, which, although it increased 1.3% in February compared to January of this year, has accumulated decrease of 3.4% in the first two months of2012 compared to the first two months of 2011.

The Brazilian government has taken several measures to stimulate the economy, focused mainly on preventing the slowdown in the industry. And for that, it has attacked on two fronts: on the one hand, trying to contain the appreciation of the Real, taxing the entry of short-term financial resources and, more recently, foreign exchange derivative transactions, by increasing the Tax on Financial Operations (HBS), on the other hand, the government also attempts to curb imports.

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Joe Cloud
Dutch, American, Brazilian... lived there for 5 years and owns property in Brazil. Out of the country for a few years now and would like to go back, however current circumstances tell me it's not the right time.