Finance secretaries will decide whether the reduction of the ICMS tax rate on the interstate sale of inputs will continue after April 1
This Friday, 26, is decisive for the good progress of Brazilian agribusiness. The National Council for Farm Policy (Confaz), formed by Finance Secretaries from the 26 states and the Federal District, discusses whether or not to extend Agreement 100.
Established in 1997, the tax benefit reduces the ICMS rate by up to 60% on the interstate sale of agricultural inputs. According to calculations by the productive sector, the extinction of the agreement implies a R $ 16 billion impact on the food chain, inflation, international trade, employment and tax collection.
For the rural producer directly, it is estimated that the cost of production may increase from 5% to 15%, depending on the production chain, with direct effects on profitability and investment capacity. In coffee production in Minas Gerais, the increase may reach 27%, according to the Federation of Agriculture and Livestock of the State of Minas Gerais (Faemg).
A study by the Confederation of Agriculture and Livestock of Brazil (CNA) is even more pessimistic: the end of the agreement would represent an estimated increase in the tax burden for the sector of R $ 40 billion annually. It would be a higher production cost, less competitiveness for agribusiness and more expensive food for the population.
The same survey by the entity pointed out that the extinction of the agreement would be equivalent to 9.5% more in the annual IPCA, the official inflation index used by the government. The poorest would be the most affected by the increase in the tax burden on agribusiness. The entity's study highlighted that the Brazilian who earns a minimum wage commits 46% of his income to the basic food basket. Without Agreement 100, this percentage would rise to 50.8%.
Increasingly difficult to renew Agreement 100
The renewal of the benefit depends on the unanimous approval of Confaz. At the last meeting, on October 29 of last year, this reduction of the ICMS was hardly extended. The states of Sergipe and Ceará even voted against the renewal, but were removed from the idea with an agreement: Agreement 100 would be renewed for another three months (until March 31, 2021), during which time a working group would discuss the impacts renewal in the accounts of the federative units.
"It is increasingly difficult to maintain the 100th Agreement", says Renato Conchon, coordinator of the Economic Nucleus of CNA. Conchon, as well as other agribusiness representatives, believe that the states' fiscal situation, which worsened with the Covid-19 pandemic, weighs on the decision.
Source: Canal Rural