The EU today (19 December) requested consultations with the Government of Brazil under the dispute settlement provisions of the World Trade Organization (WTO) on tax measures that discriminate against imported goods and provide prohibited support to Brazilian exporters.

In recent years, Brazil has increased its use of the tax system in ways which are incompatible with its WTO obligations, providing advantages to domestic industries and sheltering them from competition. This is mainly done through selective exemptions or reductions from taxes on domestic goods.

In September 2011 the Brazilian Government imposed a large tax increase on motor vehicles (an additional 30% on their value), coupled with an exception for domestically produced cars and trucks. This discriminatory tax was due to expire in December 2012, but in September 2012 it was instead replaced by an equally problematic tax regime, named Inovar-Auto, set to last five more years. In parallel, the Brazilian authorities took steps affecting other goods, ranging from computers and smartphones to semiconductors. Under other similar programmes, tax benefits are reserved for goods produced in certain areas in Brazil, whatever the sector. The Brazilian authorities have also broadened existing systems of tax exemptions for Brazilian exporters by enlarging the number of potential beneficiaries.

These tax measures have a negative impact on EU exporters, whose products face higher taxes than domestic competitors. In addition, the measures restrict trade by favouring the localisation of production and supplies, and give an advantage to Brazilian exporters. The measures also result in Brazilian consumers facing higher prices, less choice and lower access to innovative products.

The EU has raised the issue in bilateral talks with Brasilia and in WTO bodies, but so far this has not brought progress. The measures have also been highlighted several times in the EU's annual Protectionism Reports. The EU’s decision to request WTO consultations is aimed at engaging with the Brazilian Government in consultations with a view to ensuring the respect of WTO.

Source: http://trade.ec.europa.eu/