Dilma wants to, but is it possible to exempt basic food items from taxes?

Valter Lima, from Sergipe 247 - The month of January was not good for the Brazilian consumer's wallet, in terms of the price of basic food items. In all 18 capitals surveyed by the Inter-Union Department of Statistics and Socioeconomic Studies (Dieese), there was an increase in its cost. The largest increases were recorded in Salvador (17,85%), Aracaju (13,59%), Natal (12,48%) and Brasília (11,30%).

The price adjustment curve for basic food items coincides with President Dilma Rousseff (PT) announcing the government's intention to fully eliminate taxes on items that end up on Brazilian tables and to review the products that make up the basket, because the current concept, according to her, is "outdated."

"We are studying the complete exemption of basic food items from federal taxes," she said, adding that the government is "reviewing which products are included in the basic food basket." The president also stated that she intends to speak with the states to eliminate regional charges levied on basic food items.

According to Luiz Moura, technical supervisor at Dieese in Sergipe, it is not yet possible to determine the size of the savings that will be made if the tax exemption actually occurs. “It will depend on the state, because in some places there is ICMS taxation and in others IPI. It's not possible to implement a total exemption without talking to the governors so they can assess the revenue loss,” he stated in an interview with Sergipe 247.

He also says that the measure would be very welcome, however he warns of a very relevant issue: “initially there will be a reduction, but no one guarantees that there won't be an increase later on. Supermarket A, B or C charges R$ 1 for a product and the tax burden costs R$ 0,20. So, with the tax exemption, it starts costing R$ 0,80, but under the pretext of problems with the harvest and increased costs, the store may raise the price and the product may return to costing R$ 1”.

Unlike the tax breaks for cars and the construction industry, where monitoring price reductions was more practical, explains the representative from Dieese, removing charges from basic food products is more complex. "It's very difficult to monitor this, as we don't have a tradition of controlling prices, and this isn't the best way either," he emphasizes.

According to Luiz Moura, the best approach would be to "transfer these cost savings to consumers more directly." "The initiative is positive, but there's a lot of care needed to ensure that consumers don't lose out and the state doesn't stop collecting revenue," he emphasizes.

A survey of the last twelve months – between February 2011 and last January – conducted by Dieese, shows that all regions experienced increases above 10%, with the largest increases in Natal (26,18%), Salvador (24,95%) and Aracaju (23,38%). The smallest variations were found in Curitiba (11,47%), São Paulo (11,51%) and Belo Horizonte and Rio de Janeiro (both with an increase of 11,83%).

In January 2013, São Paulo remained the capital city with the highest cost for the basic food basket (R$ 318,40). Next were Vitória (R$ 315,38), Porto Alegre (R$ 309,33), and Florianópolis (R$ 309,21) with similar values. The lowest average costs were observed in Aracaju (R$ 231,80), João Pessoa (R$ 252,13), and Recife (R$ 257,43).