Taxation of soft drinks has distortions


Wallace Nunes, Gazeta Mercantil (A.10) - 26/04/2006

São Paulo, April 26, 2006 - Study reveals that the government's strategy to avoid tax evasion created distortions in the sector. The war for the sale of soft drinks is not only characterized by marketing and price. A study prepared by the Brazilian Institute of Tax Planning (IBPT) reveals that the manufacture of soft drinks in Brazil is marked by distortion in taxation and intensified the dispute between small and large soft drink manufacturers in Brazil. But in one thing both representatives of large and small manufacturers agree: the tax burden for the soft drink sector is very high and something needs to be done to make it more competitive.

The study carried out by IBPT, at the request of the Association of Regional Soft Drink Manufacturers in Brazil (Afrebras) - which has around 238 affiliates across the country, entitled “Radiography of Taxation on Soft Drinks”, concluded that, on average among soft drinks glue and other flavors, products manufactured by regional companies receive a tax of 45,89% on the final consumer price, while those manufactured by large corporations suffer a taxation of 35,37%.

This would occur because, according to the study's coordinator, Gilberto Luiz do Amaral, in order to curb tax evasion in the sector, the federal government instituted a fixed taxation of the Industrialized Product Tax (IPI), of the Social Integration Program ( PIS) and Contribution to the Financing of Social Security (Cofins) and not ad valorem, that is, on the percentage of manufactured product and not on the final value sold to the consumer. "The strategy worked, but large corporations are able to enjoy tax benefits that ended up leading to a drop in the sector's recoil," he said.

According to the study, the value of IPI, PIS and Cofins is exactly the same (R $ 0,24) both for a liter of soft drink that costs R $ 0,90 (average price paid by families with income of up to two salaries minimum, according to the IBGE's 2002/2003 Family Budget Survey) and for the liter of the product priced at R $ 3,07 (average price paid by families with monthly earnings above 15 minimum wages). Amaral draws attention to the fact that for the cheapest product these taxes have a weight of 27% and for the most expensive, 8%.

The report requested by Afrebras is contested by the Brazilian Association of the Soft Drink Industry (Abir). According to Mario La Hoz, director of the entity - which is affiliated with Ambev, Coca Cola, Schincariol and 30 other companies - "it is practically impossible to have a price distortion because the tax burden" for the sector is the same for everyone. He also explains that there is no point in applying an ad valorem tax burden as this would increase the tax calculation base. “We have not established how much tax companies have to pay. Who establishes this is the federal government in the case of PIS, Cofins and IPI and states for the issue of ICMS (Tax on Circulation of Goods and Services). How can there be distortion? Tax was regulated for the entire sector ”, explains La Hoz.

The director of Abir points out that the price of soft drinks in the Brazilian market is not controlled, but rather suggested through a survey carried out by "suitable institutes". He also says that “there is no magic” in prices and believes that small companies in the market are evading. “In São Paulo, USP technicians do research with the population and suggest a price already included in taxes. For example, a guarana soft drink can be sold to the final consumer for up to R $ 1,60. Regional or small companies sell the product for R $ 0,99. Now I ask you a question: How do they (regional manufacturers) achieve this with the same tax burden for large companies? ”.

The president of Afrebras counters the charge of alleged evasion. "We are suitable and we are in the market to sell a product under the same conditions." Both entities Mario de La Hoz hopes that companies will be united to combat tax evasion and high taxes.


In 2005, according to the president of the IBPT, the soft drink industry collected R $ 2,6 billion in taxes, 19,07% of which was collected by regional companies and 80,93% by large corporations. "By instituting fixed value taxation and not a percentage on the price of the product, the government penalizes lower income populations," says Gilberto do Amaral.

kicker: The soft drink industry collected R $ 2,6 billion in taxes, 19,07% for regional and 80,93% for large corporations