Brazil's Government Delays Cigarettes Tax Hike Until May

The Brazilian government on Monday said it will delay until May raising taxes on cigarettes, in order to curb inflationary pressure.

The government had planned to raise the IPI industrial products tax for cigarettes starting in December. Through incremental moves the IPI would be raised to 9% through 2015, from the current level of 6%.

Inflation in Brazil stands above 7%, well above the upper limit of the government's tolerance band of up to 6.5%.

By 2015, the government expects the increased tax to bring in an extra 7.7 billion Brazilian reais ($4.6 billion) per year, from BRL3.6 billion currently, which would help offset tax breaks for other industrial sectors.

According to a study by the World Health Organization published in 2011, 15% of Brazil's population smokes. By comparison, in Mexico the rate is 8%. Chile has the highest smoking rate in the region with 34%. Argentina has 22%.

Regarding taxes, according to the same WHO survey there were 26 countries in the world that have total taxes constituting more than 75% of the retail price of cigarettes.

Brazil's tax rate represented 60% of the retail price of cigarettes. Mexico's tax rate was 63%. Argentina and Chile both had a rate of 76%.


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