Brazil Called Out for Protectionist Tax Scheme
BRUSSELS (CN) - EU regulators challenged Brazil's tax measures Thursday, claiming that they discriminate against imported goods while unfairly helping Brazilian exporters.
The European Commission said it has requested consultations with Brazil under the dispute-settlement provisions of the World Trade Organization.
It highlighted a levy Brazil imposes on imported motor vehicles - an additional 30 percent on their value, coupled with an exception for domestically produced cars and trucks - as one example of an unfair tax in Brazil.
Imposed in 2011, the tax was due to expire in December 2012, but the Brazilian government instead replaced it in September 2012 "by an equally problematic tax regime, named Inovar-Auto, set to last five more years," the commission said in a statement.
Smartphones, semiconductors and other gadgets face similar programs, commissioners said.
The EU calls Brazil its biggest trading partner, accounting for 20.8 percent of its total trade in 2012.
EU exports to Brazil were worth more $53 billion that year, and nearly $25 billion of that figure consisted of cars, electronic goods and other such goods, according to the commission's statement.
Though imports of goods in Brazil have been steadily increasing, hitting $260 billion in 2012, the imports-to-GDP ratio remains low at 14 percent of GDP, the commission added. Goods and services are included in that figure.
Brazil has recently decreased certain imports such as vehicles, which shrank from 857,900 units in 2011 to 788,100 units in 2012. From January to October 2013, the figure decreased further to 581,700 units.
That is a reduction of 11.4 percent year-on-year, regulators said. Vehicles imported from Argentina and Mexico meanwhile continued to benefit from special tax exemptions under the Inovar-Auto program, they added.
If WTO consultations do not achieve a satisfactory solution within 60 days, the EU may ask the WTO to have a panel rule on the compatibility of Brazil's measures with its rules.