Brazil targets Asian e-commerce giants, local companies in tax push

BRAZIL will soon unveil tax measures, including a crackdown targeting Asian e-commerce giants and curbs on some company tax benefits, as it looks to raise more than 100 billion reais (S$26.2 billion), Finance Minister Fernando Haddad said on Monday (Apr 3).

The e-commerce measures come in response to complaints from local retailers about unfair competition from Asian giants such as AliExpress, Shein, and Shopee.

In an interview with local broadcaster GloboNews, Haddad said companies that operate in Brazil are facing unfair competition from “one or two global players” that hide their e-commerce as person-to-person remittances, to avoid paying taxes.

He later told journalists that combating the practice, which Haddad called “smuggling”, should generate seven billion to eight billion reais in new revenue for the government.

AliExpress, owned by Alibaba Group, Shopee, owned by Sea, and Shein did not immediately respond to a Reuters request for comment.

The government plans to release the e-commerce measure by next week, together with legislation for its fiscal framework, which sets out limits on spending so President Luiz Inacio Lula da Silva’s new administration eliminates the budget deficit next year.

According to Haddad, the framework, which also depends on booming revenue, will be supported by two other measures that the government intends to submit in the next few days.

The most significant impact will come from the government’s move to seek approval from the Federal Supreme Court to disallow companies from receiving tax breaks from states on operating expenses, which result in them paying less federal tax.

The minister said the state tax relief should only apply to investments made by companies and that re-establishing federal revenues in this area could generate between 85 billion and 90 billion reais.

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Additionally, Haddad said taxation of online sports betting is expected to generate between 12 billion and 15 billion reais for public coffers, more than double the initial estimate.

During the TV interview, the minister also said a planned tax reform aimed at consumption would seek to “collect from those who do not pay” taxes, which would help increase the government’s revenue.

The tax reform proposal should be voted on in the Lower House by July and in the Senate by October, Haddad added. REUTERS