Brazil Plans to Cut Wine Taxes to 33% in Bid to Boost Local Industry

The Brazilian government is moving forward with plans to reduce the tax burden on wines and sparkling wines as part of the country’s ongoing tax reform. Acting President and Minister of Industry, Geraldo Alckmin, announced on Thursday that studies indicate the tax rate on these beverages should drop to around 33% under the new system. This represents a decrease from the current rate of about 40.5%. The announcement was made during the Festa do Vinho in Rio Grande do Sul, a key event for Brazil’s wine industry.

The proposed reduction is tied to the implementation of a new selective tax, created by the recent tax reform. This tax targets products considered harmful to health or the environment and is expected to have higher rates than the standard consumption tax. The specific details of which products will be included and their respective rates are still under discussion. The government has not yet sent the final bill on the selective tax to Congress, despite earlier indications that it would be submitted at the start of the legislative year.

Alckmin emphasized that the government will closely monitor how the selective tax is regulated for the wine sector, taking into account the unique aspects of domestic production. Representatives from Brazil’s wine industry have interpreted this move as a positive sign, suggesting a lighter tax load could help boost competitiveness for local producers.

During his visit to Caxias do Sul for the opening of the 35th National Grape Festival and Agroindustrial Fair, Alckmin also addressed concerns about international trade agreements, particularly between Mercosur and the European Union. He explained that tariff reductions for wine imports under this agreement will be phased in over eight years, while sparkling wines will see a 12-year timeline. This gradual approach aims to give Brazilian producers time to adapt to increased competition from European imports.

Alckmin also announced that President Lula will issue a decree to regulate safeguard measures in trade agreements. These safeguards are designed to protect domestic industries from sudden surges in imports that could harm local businesses. The decree will set clear rules for when and how these protections can be applied, including procedures for investigation and conditions for imposing import quotas or suspending tariff reductions.

The expansion of trade agreements by Mercosur has increased Brazil’s share of commerce covered by preferential tariffs from 12% to 31.2% since 2023. This growth has prompted calls for more specific regulations on safeguard measures, as existing rules were based on broader multilateral agreements.

Before attending the festival’s opening ceremony, Alckmin met with grape and wine producers from Serra Gaúcha, one of Brazil’s main wine regions. Discussions included not only trade agreements but also issues such as tax reform, international tariffs, and credit lines for renewing truck fleets used in agricultural transport.

The government’s efforts to lower taxes on wines and sparkling wines are seen as part of a broader strategy to strengthen Brazil’s wine industry amid increasing global competition. The sector hopes that reduced taxes and clear trade protections will help maintain its growth and support local jobs in regions dependent on viticulture. The final details of both the selective tax legislation and safeguard regulations are expected to be released in the coming weeks as they move through government review before reaching Congress.