Aviation Coalition Protests Brazilian Tax Proposal

 - August 16, 2021, 8:40 AM

A broad coalition of aviation interests has issued a manifesto opposing the proposed loss of a 30-year exemption from Brazilian import duties and several other VAT-type assessments, which would raise the industry’s tax burden by an estimated $955 million. A legislative committee added the change to a broad tax reform bill promised during the presidential campaign. The taxes would apply to imports and sales in the domestic market for aircraft, spare parts, and maintenance services, and for import duties. Sixty percent of the cost would fall on airlines and cargo carriers, and the rest on general and agricultural aviation.

The manifesto argues that the moment is inopportune, given the severe effect of the pandemic on aviation, which suffered a 60 percent drop in revenue in Brazil. International passenger service remains below 20 percent of pre-pandemic levels and analysts don’t expect a full recovery until 2023. The current unfavorable exchange rate of the Brazilian real represents an additional strain for an industry that calculates 50 percent of its costs in dollars.

While the associations say they support the idea of a broad reform of the country’s dizzying array of overlapping taxes, the bill’s reduction of corporate profit taxes won’t compensate for the loss of the exemption.

The industry’s low margins mean the corporate tax cut wouldn’t be an effective trade-off even in good times. “Civil aviation is characterized by transferring its efficiencies to the user,” said Latin American and Caribbean Air Transport Association (ALTA) CEO Ricardo Botelho. “Therefore, the additional costs, and especially the costs that do not follow global parameters, go against this effort of encouraging aviation.” For example, increased costs to agricultural aviation might result in higher food prices.

The manifesto concludes by recalling how both airlines and general aviation helped transport medical supplies, personnel, and patients at the height of the pandemic.

Along with ALTA, the Board of Representatives of International Airlines in Brazil (JURCAIB), the Brazilian General Aviation Association (ABAG), the Brazilian Association of Air Companies (ABEAR), the Brazilian Association of Auxiliary Air Transport Services (ABESATA), the National Union of Air Companies (SNEA), the National Union of Air Taxi Companies (SNETA), and the National Union of Agricultural Aviation Companies (SINDAG) endorsed the manifesto.