Employer Action Code: Act
The Brazilian economy has faltered of late. In 2010, the growth rate was 7.5%; in 2011, it slipped to 2.7%. Recently, Finance Minister Guido Mantega cut his growth estimate for 2012 from 3% to 2%. The consensus among economists is for growth of 1.6% in 2012, although most expect growth to revive to about 4% in 2013.
Last October, we reported on social tax relief measures extended to certain business sectors, including clothing, footwear, furniture and (most importantly) software. The measures were intended to spur growth in the affected sectors. The 20% employer social tax was suspended and replaced by a temporary tax of 1.5% (2.5% for software) on gross revenues, effective Dec. 1, 2011, through 2012; it was expected to cost the government between BR20.5 billion — BR30.7 billion (US$10 billion — US$15 billion). The recent announcement extends these measures through the end of 2014.
Effective in 2013, similar measures have been extended to several new business sectors, including pharmaceuticals; chemicals; steel, copper and aluminum companies; and automobile and aircraft manufacturers. The latest measure is expected to cost the government about BR13.3 billion (US$6.5 billion).
Employers in affected sectors will benefit significantly from the social tax changes. The measures should put these businesses in a stronger growth position if the Brazilian economy revives as anticipated. Affected businesses should use this opportunity to strategize about how to invest in their operations and retain the best talent with top-tier talent and reward programs.