Brazil Mulls Tax Cuts In Manufacturing And Electronics Sectors

by Mike Godfrey, Tax-News.com, Washington

14 August 2006

Brazil's government is reportedly studying new tax breaks to attract foreign investment to the country's electronics industry.

The Wall Street Journal reported Planning Minister Paulo Bernardo as saying that the government is seeking room for cuts on capital goods to stimulate Brazil's exporting industries.

"The government understands that the tax burden is high, but that there aren't conditions at the moment to offer a broad-based tax reduction," Bernardo said.

"However, it's possible to make tax reductions that increase the competitiveness of Brazilian companies and that can generate jobs," he added.

Brazil has already sought to boost foreign investment this year by removing capital gains tax for foreign investors in domestic government bonds. The law, signed by President Luiz Inacio Lula da Silva in June sees foreign investors exempt from the 15% tax, although exemption does not apply if investments are made from territories deemed as 'tax havens.'

This law also granted foreign investors exemption from the 0.38% Provisional Contribution on Financial Transactions, known as the 'check tax', which applies to a wide range of transactions, from electronic payments to personal checks.

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