Source: Diário Legislativo - RJ - TOURISM - 18/11/2009

Taxation applied to the tobacco industry divided opinions at a public hearing held on Tuesday (17) by the Economic Affairs Commission (CAE). The differences were between the Federal Revenue of Brazil (RFB) and the São Paulo State Tobacco Industry Union (Sindifumo), which took on the defense of the interests of small companies. The focus of the discord would be an alleged injustice practiced against small producers by unified taxation for the sector.

As explained by the auditor of the Revenue, Marcelo Fisch de Berredo Menezes, the taxation on tobacco does not distinguish between companies, which can establish their prices freely. Although the country currently has 12 cigarette manufacturers, only two of them (Souza Cruz and Philip Morris) account for 98,5% of the federal tax collection - estimated at R $ 5,5 billion for 2009 - and 88% of the national market. Small manufacturers, on the other hand, assume 12% of national production and contribute only 1,5% of tax collection.

In the opinion of Marcelo Fisch, there is no scope for adopting differentiated taxation for these companies, which would bear a heavy tax burden to offset the social cost resulting from the ills caused to health. Embittering accumulated debts of R $ 7 billion in the sector, the IRS still suffers from revenue losses, as revealed by the tax auditor, caused by cigarette smuggling and tax evasion, practiced mainly by some small companies that would have support to operate and sell its production, but which would be failing to comply with its tax obligation.

The president of Sindifumo, José Henrique Nunes Barreto, admitted that many companies have questioned the legality of the sector's tax and regulatory systems before the Judiciary. At the same time that he accused the unification of the rate of IPI (Tax on Industrialized Products) to serve the interests of multinationals, he defended the approval of a bill (PL 6400/09) recently presented by federal deputy Tadeu Filipelli (PMDB-DF ) amending the IPI legislation on cigarettes.

Following the example of the revenue representative, the president of the Brazilian Institute of Ethics in Competition (ETCO), André Franco Montoro Filho, called for combating tax evasion in the tobacco industry, as well as administrative simplification in the applied tax regime. According to him, the incidence of a tax on the value of the production unit would lead to significant gains in tax collection.

Despite expressing support for any government measure that may combat smuggling and informality in the sector, the president of the Tobacco Industry Union (Sinditabaco), Iro Schünke, opposed any decision that may interfere with production in the South of Brazil. As revealed, the region gathers 730 producing municipalities and has a planted area of ​​376 thousand hectares, where 800 thousand people work and 2008 thousand tons of tobacco were produced in the 2009/739 harvest. This production generated revenue of R $ 4,4 billion for southern producers.

The Brazilian cigars and cigarillos industry was defended by the president of Sinditabaco in the State of Bahia, Ricardo Becker. As it involves artisanal production, it claimed a differentiated tax treatment, a claim reinforced by the “unfair competition” faced with Cuban cigars, which would be entering the country without paying an import tax.

Asked by CAE vice president, senator Delcídio Amaral (PT-MS), about legislative proposals that could bring greater competitiveness to the sector, Ricardo Becker supported the return of the 15% IPI tax rate for cigars and cigarillos, while Iro Schünke made an appeal to parliamentarians to also take into account the rights of smokers when analyzing projects of interest. Senator Eduardo Suplicy (PT-SP) was also present at the public hearing.