Sin tax: alcoholic beverages, soft drinks and cigarettes; government says taxation starts in 2027 to reduce consumption

Emporium in São Paulo sells alcoholic beverages and food
Credit: Soulpics photography
Approved as part of the tax reform on consumption, the selective tax, known as sin tax, begins in 2027 and aims to make products or activities that cause harm to health or the environment more expensive.

The list includes alcoholic drinks, soft drinks and cigarettes. The new tax will also apply to some vehicles, depending on the level of pollution, on the extraction of mineral goods, and on lotteries, betting and fantasy sports games.
To g1, the Ministry of Finance reaffirmed its "interest in implementing the Selective Tax for next year, mainly due to its regulatory effect of reducing the consumption of products that are harmful to health and the environment".
To effectively start taking effect, the National Congress needs to approve the tax regulations, but the federal government's proposal has not yet been sent. The Executive says this will be done by the end of this year.
➡Survey by Fiocruz, cited by the Ministry of Health, says that, in 2019, alcohol consumption cost R$ 18.8 billion, of which R$ 1.1 billion related to direct federal costs with hospitalizations and outpatient procedures in the SUS, and R$ 17.7 billion to lost productivity due to premature mortality, leaves of absence and early retirement resulting from diseases associated with consumption of alcohol, loss of working days due to hospital admission and social security sick leave.
➡In Brazil, according to the Ministry of Health, diseases related to smoking generate an indirect cost of R$86.3 billion per year, which results in a total annual expenditure of R$153.5 billion for the government, equivalent to 1.6% of GDP. "On the other hand, the collection of federal taxes on the sale of cigarettes is only R$8 billion per year, which highlights an imbalance between health spending and the revenue generated by the sale of the product", he says.
➡Considering ultra-processed drinks, such as soft drinks, isotonic drinks and soft drinks, the government estimated, in a study to support the use of the selective tax, that the costs accounted for by the Unified Health System (SUS) with the treatment of diseases associated with the consumption of these products are estimated at almost R$3 billion per year.
Merchants from Alto Tietê explain how 'sin tax' can impact sales
Amount of tax to be charged
➡The amount of tax to be charged on each product has not yet been defined. In the regulation, which will have to be made by the end of this year, to take effect from 2027, the economic area will propose, and the Legislature will define, what the rates will be.
"The project is under internal development at a technical government level and depends on final adjustments and definitions, before its publication. Only after defining the rates will it be possible to estimate possible economic impacts", communicated the Ministry of Finance.
➡National producers say that the drinks alcoholic beverages, for example, already have high taxation in Brazil, with a tax burden varying from 40% to more than 80% of the price of the product, and they assess that a possible increase in taxes charged will put pressure on profit margins, potentially generating price transfers, layoffs and stimulating the illegal market (see below). and municipalities on consumption).

Unlike these taxes, any use of sin tax credits in the previous or subsequent stages of the chain will be prohibited.
According to the approved text of the tax reform, the sin tax will replace the current Tax on Industrialized Products (IPI), which will remain, from 2027, only for items from the Manaus Free Trade Zone (ZFM) produced in other regions of the country.
"Although restricted to a few goods and services, the selective tax is a complement to the Reform regulations Tax, considering that a significant number of products will have their IPI rates zeroed in 2027", informed the Ministry of Finance.
The selective tax will apply to the following products:
alcoholic drinks;
cigarettes and smoking products;
sugary drinks (soft drinks and similar);
vehicles (depending on the level of pollution), vessels and aircraft;
extraction of mineral goods, such as iron ore, oil and natural gas;
lotteries, betting and fantasy sports games.
➡For alcoholic beverages in accordance with the rule approved in the tax reform, the tax will be a combination of:
A specific rate: fixed value, in reais (R$), according to the alcohol content, that is, drinks with a higher alcohol content will have a higher tax.
An ad valorem rate: percentage of the value of the product, according to the type of drink.
What sector representatives say
Jones Valduga, the president of the Brazilian Wine Culture Union (Uvibra), stated that the sector views the determination of the rate that will apply to wines with "great concern". He recalls that the sector employs more than 90 thousand people directly, is present in 17 states and receives three million tourists per year in wine tourism.
"Determining the rate is in the hands of the National Congress, and the sector has qualified technical subsidies to contribute to this debate. Our position is clear: a balanced rate protects revenue, combats the illegal market and preserves an economic, cultural and social heritage that took Brazil more than 150 years to build", assessed the executive of Uvibra.
According to Eduardo Cidade, president of the Brazilian Distilled Beverages Association (ABBD), as the selective tax rates have not yet been defined by the government, this makes any projection of impact on the sector premature. He noted that the weight of taxes on spirits currently exceeds that on beers in Brazil.
"What ABBD advocates is not an increase in the burden on any category - it is the correction of an asymmetry. A model that taxes the alcohol molecule [only the quantity in each bottle], not the label [type of each drink] With a single rate per liter of pure alcohol and a single rate on the price, the bill is proportional: those who have more alcohol pay more, those who cost more pay more. Without category privileges", says Eduardo Cidade.
Márcio Maciel, executive president of the National Beer Industry Union (Sindicerv), reported that sector estimates point to a current tax burden of 56% on beer, that is, the proportion of taxes in the final price, and that a possible increase could lead to an increase in consumer prices.
"The issue of price is something very specific to companies. If taxes increase, it is reflected in the market. The beer margin is smaller than wines and spirits, beer is very competitive. Any tax increase is something that is very difficult, especially because beer inflation has been above the IPCA [official inflation] in recent years", said Márcio Maciel, from Sindicerv.
Carlos Lima, president of the executive board of the Instituto Brasileiro da Cachaça (IBRAC), informed that the The weight of taxes is already high on the product, accounting for more than 80% of its final price. Therefore, the executive assesses that the sector would not be able to pass on potential tax increases to prices.

The sector encompasses more than 600 thousand direct and indirect jobs.
"Any increase in this taxation, we will begin to feel the negative effects, such as a large migration to the informal market, the closure of factories and the dismissal of employees. Taxation in the cachaça sector today is far above what it can handle. It is not a question of the timing of the selective tax. Any movement by the government to tax more, collects less and the illegal market grows", declared Carlos Lima, from IBRAC.
In a formal statement, the Brazilian Association of Soft Drinks and Non-Alcoholic Beverage Industries (Abir) reported that the sector includes more than two million direct and indirect jobs. The entity says it does not agree with the selective tax on sugary drinks, which, in its view, "brings a series of inconsistencies regarding its objective".
"The argument of an increase in obesity due to sugary drinks is also not sustainable, according to data from the Ministry of Health itself, which points to exponential growth in the index in Brazil and a halving in the frequency of consumption", says Abir, in a note.
The Brazilian Tobacco Industry Association (Abifumo) assessed, through a note, that the possible definition of an excessive rate for cigarettes in the sin tax could lead to a loss of competitiveness of national production in the face of the illegal market, "creating an environment favorable to the expansion of criminal organizations". According to the association, tobacco is already among the most taxed segments in the country.
Federal, state and municipal governments publish rules for implementing tax reform

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