The incidence was cumulative at total rate of 3.65%, with no ... (the difference between the financial revenues and the
Programa EUROsociAL Fiscalidade Estratégias Fiscais Ligadas à Coesão Social
Encontro de Especialistas em Política Tributára – Receita Federal e União Européia
PIS/COFINS and IPI The Federal Consumption Taxes
Jefferson José Rodrigues Chief of Economics Studies
Secretaria da Receita Federal
Brasília – Brazil
November 20-23, 2006
General Aspects Brazilian Tax System Consumption
Federal IPI PIS/Cofins Cide Comb.
Income
Federal IRPF IRPJ CSLL
Social Sec.
Federal
INSS
Others
Federal Rural
State Vehicle
State
ICMS
Property
Local Urban
Local ISS
% GDP
16.4
8.1
6.9
1.0
5.0
% Tax Burden
44.0
21.6
18.4
2.8
13.2
Receita Federal
PIS/COFINS Brief history 9 The Social Integration Program (PIS) was created in 1970 and had incidence on company's turnover at the rate of 0.65%. 9 The Contribution for the Financing of Social Security (Cofins) was created in 1982 and had incidence on company's turnover at the rate of 0.5%. Gradually, the rate was increased until achieving 3%, in 1999. 9 Along the years, there was a trend to converge the tax bases of the two contributions. Consequently, nowadays the tax rates are almost a simple addition.
Receita Federal
PIS/COFINS Features until 2003 9 Until 2003, the PIS/Cofins were contributions with incidence on company's turnover. 9 The incidence was cumulative at total rate of 3.65%, with no incidence on imports and exports. 9 The financial sector was charged at the rate of 4.65% on the spread (the difference between the financial revenues and the interest rate a bank pays on deposits). 9 There were few exemptions, and some economic activities were charge in a single stage.
Receita Federal
PIS/COFINS Features after 2004 9 Under the present rules, PIS/Cofins are hybrid contributions: for some economic activities, they are cumulative at total rate of 3.65%. For others, they are non-cumulative at total rate of 9.25%. 9 When they are non-cumulative, the tax basis is the difference between gross revenue and total deductible purchases. 9 Imports are charge at total rate of 9.25% and exports are exempt. 9 The financial sector is still charged at the rate of 4.65% on the spread (the difference between the financial revenues and the interest rate a bank pays on deposits).
Receita Federal
PIS/COFINS Features after 2004 9 There are some exemptions, like capital goods and basic foods . There are more economic activities charged in a single stage. 9 In some cases, the buyer of a service must withhold at source the PIS/Cofins 9 The collection of PIS/Cofins is not shared with States and Municipalities. 9 The collection is directed to financing the social security system (health care, pension system and social assistance).
Receita Federal
PIS/COFINS PIS/Cofins Collection * 6,0%
Tax Collection (% of GDP)
5,0%
4,0%
1.65% (1983)
3,0%
5.40% (2005)
2,0%
1,0% * Pasep included.
0,0% 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Receita Federal
PIS/COFINS PIS/Cofins Collection * 40% 35%
% of Consumption Collection Relative Share (%)
30% 25% 20% 15%
% of Federal Revenue Taxes 10% 5% * Pasep included.
0% 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Receita Federal
IPI Basic features 9 The Tax on Industrialized Products (IPI) replaced, in 1967, the federal consumption tax. 9 The IPI is a value-added tax only charged on the manufacturing stages (it is not charged on services). 9 The rates are defined under the harmonized system (several different brackets). 9 According to a constitutional rule, the IPI shall be selective, based on the essentiality of the product. 9 The highest brackets are levied on tobacco, alcoholic drinks, vehicles and luxury goods. Receita Federal
IPI Basic features 9 Is levied on imports and is not levied on exports. 9 57% of the collection is shared with States and Municipalities. 9 In the last few years, there has been a gradual exemption of capital goods. 9 It is an important tool of industrial policy of the federal government. The brackets may be changed by the executive power. 9 There are many programs of regional development based on the exemption of IPI (e.g. Zona Franca de Manaus).
Receita Federal
IPI IPI Collection 3,0%
Tax Collection (% of GDP)
2,5%
2,0%
2.52% (1983) 1,5%
1,0%
1.29% 0,5%
(2005)
0,0% 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Receita Federal
IPI IPI Collection 30%
% of Consumption Collection
Relative Share (%)
25%
20%
15%
10%
% of Federal Revenue Taxes 5%
0% 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Receita Federal
PIS/COFINS + IPI Tax Collection 8,0%
Tax Collection (% of GDP)
7,0% 6,0%
4.18% (1983)
5,0% 4,0% 3,0%
6.70% (2005)
2,0% 1,0% 0,0% 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Receita Federal
PIS/COFINS + IPI PIS/Cofins + IPI Collection * 50% 45%
% of Consumption Collection
Relative Share (%)
40% 35% 30% 25% 20% 15%
% of Federal Revenue Taxes
10% 5%
* Pasep included.
0% 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Receita Federal
CIDE - Combustíveis Basic features 9 The Economic Contribution on Fuel (CIDE Combustíveis) replaced, in 2002, a non-tax government revenue that was charged on fossil fuel and directed to a fund used do balance changes in the international price of oil. 9 It is charged in the refinery. The tax rate is specific (a fixed amount per liter of fuel). 9 The amount of the specific contribution is variable, according to the type of fuel.
Receita Federal
CIDE Combustíveis Tax Collection 0,6%
Tax Collection (% of GDP)
0,5%
0.56% (2002) 0,4%
0,3%
0,2%
0.39% (2005) 0,1%
0,0% 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Receita Federal
Programa EUROsociAL Fiscalidade Estratégias Fiscais Ligadas à Coesão Social
Encontro de Especialistas em Política Tributára – Receita Federal e União Européia
PIS/COFINS and IPI The Federal Consumption Taxes
Jefferson José Rodrigues Chief of Economics Studies
Secretaria da Receita Federal
Brasília – Brazil
November 20-23, 2006
