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November 10, 2016

Proposals for Grain Export Taxes in Brazil Dropped

Politicians in Brazil put fourth two proposals in 2016 to increase the taxes on grain exports from Brazil. The first proposal was for various states in the center-west region of Brazil to impose the tax including the states of Mato Grosso and Goias. The second much larger proposal was for a nationwide tax covering all the grain exported from Brazil regardless of the state where it is produced. Due to unified opposition from the agricultural community, both proposals never got past the discussion stage and they have now been dropped. State government officials in Mato Grosso have stated emphatically that no tax increases will be forthcoming for grain exported from the state.

Since 1996, grain exported from Brazil has been exempt from the ICMS Tax, which is a circulation tax imposed on products produced in one state, but consumed in another state. The tax must be paid before the products are allowed to cross state borders. The ICMS tax varies by state, but it is generally in the range of 10%. The proposals were to revoke the exclusion for exported grain, but farmers insisted that the exemption was necessary to stimulate grain exports.

The new tax proposals were put forth this year as a way to increase revenues in compensation for declining federal support for social programs at the state level.

The argument of the agricultural community was that increased taxes would be very detrimental to farmers at a time when commodity prices are at multi-year lows and production costs are at record highs. The Brazilian Minister of Agriculture, Blairo Maggi, whose family is one of the largest soybean producers in Brazil, labeled the tax idea as "crazy" and helped convince the Brazilian president to drop the proposal, at least for now.