The conflict involving the reduction of the Tax on Industrialized Products (IPI) and the Manaus Free Trade Zone took another turn at the Federal Supreme Court (STF) this Monday (8/8). Minister Alexandre de Moraes suspended part of decree 11.158/2022, issued by the federal government on July 29, which detailed the products manufactured in Brazil and subject to the 35% reduction of the IPI. The discussion is taking place in ADIs 7153, 7155 and 7159, and Moraes is the rapporteur.
The presidential decree with the list of products subject to IPI reduction was published after Moraes' decision in May to suspend provisions of other decrees that provided for the reduction of the tax rate. The federal government justified the new rule as an adaptation to the Supreme Court's decision.
The addition of the new federal regulation to the existing actions was a request from the Solidariedade party and the governor of the state of Amazonas, Wilson Lima (União Brasil). For them, the federal government is trying to circumvent the Supreme Court's decision that suspended provisions of three other decrees reducing IPI for products also manufactured in the Manaus Free Trade Zone.
In his decision on Monday, Moraes upheld the reasoning of the other decisions, stating that goods manufactured in industrial centers outside the Manaus Free Trade Zone and that compete with Amazonian products cannot have their IPI reduced to prevent goods manufactured in the Amazon from losing competitiveness and, therefore, the free trade zone from being emptied. The minister understands that the Amazon region is an area of tax benefits guaranteed by the Constitution, with the aim of promoting regional development.
Moraes understood that, although the new decree removed 61 products eligible for exemption, the list in decree 11.158/2022 contains products with a Basic Production Process (PPB) similar to that of the industries in the Manaus Free Trade Zone. He cites, for example, the case of concentrated extracts or flavors, used to produce soft drinks.
“Decree 11,158/2022 linearly reduced the IPI on hundreds of products produced in the Manaus Free Trade Zone and, additionally, consolidated the reduction of the rate applicable to the product classified under code 2106.90.10 Ex01 of TIPI (concentrated extracts or concentrated flavors) to 0%, which is why, as argued by the petitioners, the same reasons for unconstitutionality that supported the granting of the previous precautionary measure remain,” wrote the minister.
The decision is preliminary in nature. Moraes gave the Presidency of the Republic ten days to respond. After this period, the AGU and PGR will have five days to also respond in the case.
Understand
President Jair Bolsonaro issued three decrees changing the IPI, and among the changes was a zero rate for concentrated extracts of non-alcoholic beverages and a reduction from 35% to 25% on several manufactured items, such as automobiles and white goods. The government's idea was to stimulate national industry and was celebrated by the National Confederation of Industry (CNI). The government even calculated that, in 15 years, the tax exemption will generate more than R$$ 530 billion in investments.
However, the decrees caused discomfort among the government of Amazonas and the Amazonas delegation in the National Congress, especially regarding soft drink concentrates, because by reducing the tax rate to zero for the entire country, the industry in Manaus would lose the competitiveness guaranteed by the tax benefit granted to the region. The governor even went to Brasília in person to talk with Ministers Alexandre de Moraes and the President of the STF, Luiz Fux.
The issue was taken to court by political parties, the governor of Amazonas and the Federal Council of the Brazilian Bar Association, which are challenging the validity of the decrees in the Supreme Court. The parties, the Brazilian Bar Association and the governor claim that the rules are unconstitutional because they violate the Federal Constitution, which determines the maintenance and viability of the Manaus Free Trade Zone. Therefore, the reductions in IPI rates for the entire country remove the benefit granted to the region and hinder the competitiveness of industrialized products in Amazonas.
Moraes then suspended part of these three decrees in relation to ZFM products. However, Bolsonaro issued another decree with the list of products eligible for the tax benefit, and this fourth decree is also unconstitutional in Alexandre de Moraes' view.