Change in the system of taxing soft drinks may harm production in the free zone

The Abir (Brazilian Association of soft drinks and non-alcoholic drinks) reported yesterday (18/6), in a statement, which was surprised by the inclusion in the Bill 863/2015, of the proposed change in taxation on the production of soft drinks in the Manaus free trade zone.
The entity, which represents major manufacturers in the sector, said in a statement that the Government's decision "it's sharp attack on the Manaus free Zone, which can generate serious harm not only to the beverage industry, but also the entire northern region of the country."
The measure was included in the Bill that makes policy review of payroll, in order to offset or exceed the estimated revenue loss to the exclusion of nine sectors, which will have limited tax increase to 50%. The Government hoped to raise over $ 12.5 billion per year with increasing rates of 56 industries that were benefited by the exemption of the sheet, but, with the exclusion of some segments, the estimate now is to raise between $ 10 billion and $ 10.5 billion. The amendment to change the taxation for soft drinks 20% reduces to 4% the IPI (tax on industrialized products) levied on extracts and concentrates for soft drinks. As companies producing soft drinks in the free zone are exempt of IPI, they receive tax credits equivalent to 20% of the value of the sale to other regions. The change in taxation will reduce by 80 percent the tax credits obtained by these companies and will generate for the Government an increase in tax collection of $ 2 billion to $ 2.5 billion.
The change produces an impact on Big Pharma. Today, Ambev, Coca-Cola, Pepsico and Kirin Brazil maintain factories in the Manaus free trade zone for the production of extracts and of concentrates. According to Afrebras (an Association of manufacturers of soft drinks from Brazil), 90% of the production of soft drinks in the country is made with concentrated processed in the free zone. "This is an old claim of the small and medium-sized companies. This tax regime today only benefits the four largest companies and harms the other competitors, "said Fernando Rodríguez de Barrios, President of Afrebras.
The Executive said that some manufacturers have used the tax credits also to offset costs in the production of beer, negatively affecting competition in two segments of the beverage industry. In the evaluation of neighborhoods, the concentration of production in four companies is due in part to this tax regime. "This is a situation that hinders free competition and must end," he concluded.
Sought by the Valor Econômico, Ambev reported through its press office who do not comment it. Coca-Cola, Pepsico and the Kirin Brazil did not respond to the request for an interview.