The change in the ICMS tax rate for industries in Santa Catarina, which comes into effect next Sunday, has economic impacts for the State, but may come as a reduction for the consumer.
Therefore, the 17% tax paid by the sector until Saturday on retail sales in Santa Catarina will become 12%.
However, this puts the SC industry on the same level as companies in Rio Grande do Sul and Paraná, which sold their products to Santa Catarina stores with ICMS at 12%.
According to the Secretary of State for Finance, Paulo Eli, the change will have, above all, an economic effect. For the consumer, he classifies the result as “neutral”.
In other words, Eli is not betting on price changes. However, the medium-term impact on government coffers could reach R$1 billion.
This is because local industries will start selling more to Santa Catarina retailers, who previously chose to buy from neighboring states because of the lower tax.
The change in the tax rate has been celebrated by the Federation of Industries of Santa Catarina (Fiesc). The entity has been fighting for a reduction for years.
The president of Fiesc, Mario Cezar Aguiar, says that “it didn’t make sense for our industry to have a higher tax burden than neighboring states” and that “the change will stimulate production and, consequently, the generation of jobs and wealth in Santa Catarina”
But what about reduction?
The new model, approved by Alesc at the end of 2019, directly benefits industries. In return, retailers will continue to pay 17% on products sold to consumers. Pressure from the retail sector, however, led Fiesc to ensure that industries will pass on the 5% difference.
According to the president of the Federation of Chambers of Retailers of Santa Catarina (FCDL), Ivan Tauffer, if the promise is fulfilled, consumers will feel the impact of price reductions. Otherwise, as Tauffer guarantees, retailers will seek support from Alesc to change the current tax rate of 17% for the sector.
In the case of bars and restaurants, the logic is the same. However, according to the president of the Brazilian Association of Bars and Restaurants in Santa Catarina (Abrasel), Raphael Dabdab, the impact should be small. And the explanation is mathematical.
The price of a meal, for example, is calculated based on a number of factors, although the cost of food represents only a part of them.
As the 5% already represent a small portion, the effect of reducing the values will be small,