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Brazil Could See Drastically Lower Taxes for Garment Imports

Brazil could soon see a new tax regime for the textile and apparel sector that would lower the tax burden on garments imported to the South American nation.

In an effort to increase the country’s competitiveness in the market, the Brazilian Textile Industry Association (ABIT) has proposed a reduction to the federal tax rate for textile and apparel products–which currently hovers around 18 to 22 percent on average–that would reduce the tax to just 5 to 6 percent. The idea is currently under consideration by the Brazilian government.

The federal and state taxes applied to imports in Brazil can at times nearly double the actual cost of imported products, which poses challenges for companies doing business in and exporting to Brazil, and often costs the country business.

Brazil imported $5 billion worth of textiles from January 2013 to September but, from January to July 2013, physical production in the country’s textile segment was down 3 percent and clothing production declined 2.2% from the same period last year, according to ABIT.

ABIT hopes to see the proposal, called Competitive Tax Regime for Garment (RTCC) approved for 2014 and says even a temporary implementation would be beneficial for the industry in terms of competing with international markets.

According to Brazil’s Estadao, ABIT president Aguinaldo Diniz Filho said the organization is confident that if the RTCC were put into place for even three to five years, the government would see increased revenue for the textile industry.

Alfredo Emilio Bonduki, president of Sinditextil-SP, an organization representing the textile production chain in Sao Paulo met with Brazil’s Minister of Development, Industry and Foreign Trade, Fernando Pimentel earlier this year to discuss the state of the textile sector.

He presented Sao Paulo specific data that pointed to a struggling clothing sector. In 2012, he said, “We had a 26 percent drop in the index of manufacturing production of Sao Paulo, against a 45 percent increase in imports and a loss of 17,000 jobs in the last year.”

After hearing how adversely these taxes have affected the industry, the Minister accepted that “the textile and apparel industry in Brazil needs new and urgent measures to increase competitiveness, production and generation of employment,” Bonduki said.