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January 23, 2015

Ag Machinery Exemption for Road Taxes Vetoed by Brazil President

Brazilian farmers hoped that their nationwide protests several months ago had achieved their goal of derailing legislation requiring agricultural machinery in Brazil to have license plates and to pay road taxes similar to passenger vehicles and trucks. Their hopes were dashed earlier this week when President Rousseff vetoed an amendment passed in the Brazilian Congress that would have exempted agricultural equipment from the new requirements.

Brazilian legislators now have 30 days to attempt to gather enough votes to override the president's veto.

These requirements could cost farmers in Brazil thousands of dollars per year which they are not able to pass along. They feel this is just a "money grab" on the part of the government and there is no justification for a tractor or combine paying road taxes when they rarely travel on the rural roads and spend nearly all the time on private property.

Farmers are adamant that their machinery should not be treated similar to a truck or bus that spends all the time on the highways of Brazil. The road tax alone is 3% of the value of the vehicle and in the case of a combine that could cost as much as R$ 700,000, the tax could be as high as R$ 20,000 per year (USD 7,700 per year). Farmers feel this is an absurd tax for a piece of equipment that only travels down a rural road when moving from one field to the next.

Legislators have been fighting this requirement since it was first introduced in 2008. The requirement has been postponed several time until it finally reached a point late last year where all the equipment manufactured after August 2014 had to be licensed and the tax paid by January 1, 2015.

Farmers are not opposed to some form of registration for their equipment because it could be used by police in retrieving equipment that may be stolen, but they feel this legislation goes way beyond what is needed. At a time of low commodity prices, high costs of production, and reduced margins if any margin at all, these new requirements could be the tipping point that forces some farmers out of business.