The government of Minas Gerais has sent a bill to the state Legislative Assembly that reinstates the two-percentage-point increase in ICMS for goods considered superfluous according to state legislation. According to the proposal, this additional amount is intended to finance, in particular, the full payment of the Minas Gerais Social Assistance Floor and other actions of the Poverty Eradication Fund, established in 2011.
Items considered superfluous include alcoholic beverages, cigarettes, soft drinks, pet food, perfumes and weapons (see the full list below). Bill 1295/2023 received a favorable opinion from the Constitution and Justice Committee (CCJ) and the Financial and Budgetary Oversight Committee (CFFO), went to the plenary and returned to the CFFO for analysis of amendments on September 20.
The two percentage point surcharge on surpluses was established in 2011 as a source of funding for the Poverty Eradication Fund, implemented by then-Governor Antonio Anastasia. The measure was renewed in 2015 and was in effect until December 2022, when it needed to be renewed. However, the government missed the deadline. As a result, Governor Romeu Zema is seeking to reinstate the charge starting in 2024.
Impact on sectors
The industries involved, however, have reacted to the proposal. The Brazilian Association of the Personal Hygiene, Perfumery and Cosmetics Industry (Abihpec) states that the government is seeking “in an absolutely mistaken manner to burden the society of Minas Gerais”. The sector considers it unfair to be among those who will have the tax increase, “based on a backward concept of superfluous products”, while others “undeniably harmful to health” are left off the list. Although cigarettes and alcoholic beverages are on the list of superfluous products, the law provides for exceptions, such as cigarettes in packs and cachaça.
“Our sector is outraged by such tax injustice, which causes us great indignation,” it said in a statement. “Considering essential products that help maintain the health, well-being and self-esteem of Brazilians, that minimize the risk of disease and expenditure on public health costs for treating the population, as superfluous, makes no sense,” it added.
Another sector that complained was the beverage industry. For SindBebidas-MG, the measure affects production, jobs and competitiveness. The government stated to the Legislative Assembly of Minas Gerais that the resources are of “extreme importance” to make the fund’s actions viable.
See the list of products that will have an increase in taxation, according to PL 1295/2023
- Non-alcoholic beers and alcoholic beverages, except sugarcane or molasses spirits;
- Cigarettes, other than those packaged in packets, and tobacco products;
- Weapons;
- Soft drinks, isotonic drinks and energy drinks;
- Pet food;
- Perfumes, colognes, cosmetics and toiletries, except shampoos, sunscreen preparations and personal soaps;
- Food for athletes;
- Cell phones and smartphones;
- Photographic or filming cameras and their parts or accessories;
- Equipment for sport fishing, except safety equipment; and
- Sound or video equipment for automotive use, including speakers, amplifiers and transformers.