Wine sector expects increased taxation with selective tax

The possible regulation of the selective tax on alcoholic beverages has left the wine sector on alert in Brazil. Even without defining the rates, entities linked to the sector estimate that the tax burden on wine could reach around 55% from 2027.

In a document prepared by Consevitis-RS, the sector states that wine taxation may consider two components: a rate levied on the value of the operation (ad valorem) and another specific rate related to the alcohol content of the drink (ad rem).

The material highlights that the percentages will still be defined by the Federal Senate, but the rate should be in the intermediate class of the list of alcoholic drinks, as it will be pre-fixed according to the alcoholic percentage on the labels.

In the assessment of the accountant and co-owner of the Casa Marques Pereira winery, Fábio Marques Pereira, the concern of small wineries goes beyond the final tax rate.

"The real test for working capital lies in the mechanics of split payment and the speed of recovery of tax credits", he states.

According to him, unlike other segments of the industry, wines with higher added value have a prolonged industrial cycle. Some lines remain in barrels and cellars for between 12 and 24 months before being sold. During this period, resources remain immobilized while the company continues to bear production costs and the lack of working capital.

"Any delay or friction in the clearing of credits on essential inputs such as imported bottles, natural cork stoppers and agricultural machinery can stifle the small producer's liquidity before the product even reaches the market", he says.

The expert also cites the indirect impacts of the reform on wine tourism and wineries' hospitality operations. According to him, changes in labor relations and possible increases in operating costs could put even more pressure on the margins of small producers.

The selective tax will be applied to all producers of alcoholic beverages, however entities linked to wine are requesting a change in the understanding of Brazilian legislation on the drink.

Consevitis seeks to recognize wine as a product of cultural and regional value, as it is the expression of a segment of the immigrant population to the country, in addition to being linked to the industrial, wine tourism and export chain of a Brazilian product.

In contrast, neighboring countries such as Argentina and Chile adopt different tax treatments for wine, which influences the international competitiveness of the sector.

The entities defend that wine receives differentiated tax treatment, similar to that observed in some producing countries, where the drink is recognized as an agri-food product and of cultural value."

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Source: CNN