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Brazil: new decision imposes heavy tax burden

Whereas most other countries around the world are actively seeking to encourage recycling, Brazil is going against this trend by reintroducing taxes for recycling companies, thus disincentivizing the sector and harming the environment.

The Brazilian Supreme Court recently overturned an exemption from PIS and Cofins federal taxes for operations engaged in the sale of recyclable materials to industry. This exemption has applied for over 15 years and was adopted at the time as an incentive for the recycling of disposable inputs. Recycling companies have already filed embargoes in court requesting a Supreme Court review of the decision, but a final response is still awaited.

Under this decision, companies and recycling co-operatives that sell plastic, paper, glass, steel and aluminium scrap, among others items, will be required to pay taxes of 3.65% or 9.25% on sales to industry, with no guarantee of a transfer in the price.

Clineu Alvarenga of the National Institute of Iron and Steel Scrap Companies (INESFA) has stated: “The measure, if implemented, will also discourage the collection of these materials by collectors (so-called ‘carroceiros’), more than 1 million of them across the country, who depend on this activity for their survival.”

From a fiscal point of view, the decision by the Supreme Court equates recycling to the extractive industries and will directly affect those responsible for collecting materials, thereby increasing pollution within cities.

INESFA and other Brazilian bodies linked to recycling are concerned about the effect of the Supreme Court’s actions. It is argued that “this decision could result in serious damage to one of the sectors that have contributed the most to the collection and recycling of discarded materials, reducing environmental pollution and, at the same time, boosting the country's economy, which is experiencing a difficult time”.