Increase of up to 114% in international purchases? Understand the impact of the possible increase in ICMS

Up to 114% increase in international purchases? Understand the impact of the possible increase in ICMS

André Luiz Dias Gonçalves

Representatives of the economic sector of the states of the federation will meet this Friday (06) to decide whether to increase the ICMS rate from 17% to 25%. The meeting of the National Council for Financial Policy (Confaz) could cause the tax burden on purchases on foreign websites to reach 113%, warn e-commerce stores.

According to Poder 360, the issue of raising taxes is denied by Confaz, but it has even been on the agenda of the National Committee of Secretaries of Finance, Finance, Revenue or Taxation of the States and the Federal District (Comsefaz).

The warning that an increase in the ICMS rate could cause prices of imported products to increase by more than 100% was made by companies like Alibaba. According to the Chinese giant, the current tax burden on online purchases abroad ranges from 44.5% to 92% of the transaction value, with the current ICMS of 17%. But in the event of an increase, the tax burden would be at least 60%, with the possibility of going up to 113%.

In a letter sent to state finance secretaries, the Chinese company said that such a value is “alarming and highly harmful to the economy”, and could result in other adverse impacts on state revenue. The Alibaba requested that any decision related to the increase be based on detailed studies and projections.

How would the increase impact consumers?

In the event of an increase in the ICMS rate to 25% and the consequent increase in the tax burden to up to 113%, the final price of the products purchased in foreign e-commerces will be directly impacted. In practice, this could make the consumption of imported items unfeasible, according to lawyer Felipe Santos Costa.

The tax law expert highlights that the calculation made in relation to the tax burden on international online purchases is correct. The way in which the tax is calculated takes into account the ICMS itself in its calculation base, an accounting practice known as “inside calculation”, which also considers the value of the merchandise.

“This mechanism makes the impact of the rate more significant than it appears to be, resulting, in some cases, in the tax burden indicated by e-commerce companies”, explained the partner at MV Costa Advogados, in an interview with TecMundo.

Also according to Costa, the purchase of imported products over the internet would become economically disadvantageous in this scenario, if the states decide to increase the ICMS rate. Therefore, it may be more affordable to purchase similar goods manufactured in Brazil, in some situations.

Protecting the national economy

The proposal to increase the ICMS rate in the Conform Remittance Program is defended by large Brazilian retailers as a way of “protecting the industry and national economy”. Since the most recent change in the initiative – since August, purchases below US$50 (around R$300 at the current price) also pay 20% import tax -, International remittances to Brazil fell by around 40%.

But the readjustment can also be beneficial for small local entrepreneurs. According to the lawyer, the high tax burden and high contracting costs are factors that hinder the ability of national companies to compete in relation to products imported from certain countries.

In addition to greater taxation of foreign products, the expert suggests the creation of measures that enable fairer competition between national and international production. One of them is the reduction in tax rates on items manufactured in Brazil.

“In the long term, a tax relief strategy could result in significant benefits, such as expanding the competitiveness of national industry and increasing exports to nearby markets,” he said.

Alternative to balance the scales

Measures such as the increase in ICMS on international purchases are also defended by tax lawyer Marcos Correia Piqueira Maia. However, he warns that tax rate increases for imported products may encounter resistance.

"After all, as ICMS is not an 'extra-fiscal' tax, the Federal Constitution itself prohibits any distinction between tax burdens based on origin or destination. Likewise, there are treaties, such as the General Agreement on Tariffs and Trade [GATT], which prohibit this type of conduct", detailed the partner at Maneira Advogados, in conversation with TecMundo.

For Maia, the best option for taxing foreign products is the import tax, which is the responsibility of the Federal Union. Thus, it would be possible to achieve greater “competitive balance”, offering better conditions for Brazilian industry and retail.

Currently, purchases of up to US$50 (R$300 at the rate of the day) are taxed at 20% import tax plus 17% ICMS. Meanwhile, purchases between US$50.01 and US$3,000 (from R$300.67 to R$18 thousand) are subject to a 60% import tax rate and a further 17% ICMS – with a fixed deduction of US$20 (R$120) on the total amount of import tax.

https://www.tecmundo.com.br/mercado/400734-aumento-de-ate-114-nas-compras-internacionais-entenda-o-impacto-da-possivel-alta-no-icms.htm