A broad coalition of aviation interests has issued a manifesto opposing the proposed loss of a 30-year exemption from Brazilian import duties and several other VAT-type assessments, which would raise the industry’s tax burden by an estimated $955 million. A legislative committee added the change to a broad tax reform bill promised during the presidential campaign. The taxes would apply to imports and sales in the domestic market for aircraft, spare parts, and maintenance services, and for import duties. Sixty percent of the cost would fall on airlines and cargo carriers, and the rest on general and agricultural aviation.
The manifesto argues that the moment is inopportune, given the severe effect of the pandemic on aviation, which suffered a 60 percent drop in revenue in Brazil. International passenger service remains below 20 percent of pre-pandemic levels and analysts don’t expect a full recovery until 2023. The current unfavorable exchange rate of the Brazilian real represents an additional strain for an industry that calculates 50 percent of its costs in dollars.
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