May 21, 2007

 

Brazil's grain exporters study lawsuit against tax charge

 

 

Brazil's National Grain Exporters Association (ANEC) said it is studying ways it can bring a lawsuit against two Brazilian states because of export taxes.

 

ANEC said Mato Grosso do Sul and Goias states were charging exporters on all revenue generated from international trade. The tax goes against a federal law, known as the Kandir Law that exempts raw material exports from taxation.

 

Sergio Mendes, director of ANEC, said Mato Grosso do Sul has put a 50 percent tax, called ICMS, on all exports, including soybeans.

 

Mato Grosso do Sul's finance department was unavailable for comment.

 

Evandro Niaut, marketing manager for the Organisation of Brazilian Farm Cooperatives, or OCB, said that the group met last week to discuss the Mato Grosso do Sul tax decision.

 

"They have the legal authority to hit us with the tax, of course. But this is bad news for the soy market there. We are looking into what we can do about this, including judicial action," he said, adding that OCB has not yet joined forces with ANEC on the issue.

 

"The state is losing out in the end, losing out on job creation and investment as they put the squeeze on this sector," Mendes said.

 

As the dollar continues to weaken against the Brazilian real, currently worth 1.96 reals, Brazilian agribusiness will likely be looking for fiscal battles with the government to compensate for the tightening profit margins going forward.

 

Brazil is the world's no. 2 soy producer and exporter behind the US.