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Brazil Renews IPI
Cut, Covering
Construction Sector
Rio de Janeiro - The
Brazilian government announced on Monday the
three month-long Industrialized Products Tax
(IPI) cut plan will be renewed for another
three months, while it will be extended to
the construction sector.
The first IPI cut was due to end on Tuesday.
To benefit from the lower tax for a longer
time, the country's car manufacturers agreed
not to dismiss any employees. However,
attrition programs, such as the one launched
by Ford last week, may still be carried out.
The manufacturers are also allowed not to
renew the temporary workers' contracts.
Without the measure, the automotive industry
would suffer a 30 percent fall in vehicle
sales in the second quarter, said Jackson
Schneider, President of the National
Association of Motor Vehicle Producers.
The previous cut, which began in December
2008, led to a recovery in the sector, which
represents about 23 percent of the
industrial production in Brazil.
The government also decided to extend IPI
cut to the construction sector. Taxes on
some products will be cut, and others, such
as paint and cement, will be exempted from
the tax during the next three months.
The IPI cut is only one of the government's
measures to boost the construction sector.
Last week, the government announced a 34
billion reais (14.5 billion U.S. dollars)
housing plan for the lower-income families.
The government believes that the sector's
potential for generating jobs, especially
for less qualified workers, may boost the
country's growth in 2009.
The tax cuts plan will lead to a 1.5 billion
reais (643 million U.S. dollars) decrease in
the tax collection. To compensate it, the
government decided to increase the taxes on
cigarettes. The price of a package of
cigarette is expected to increase 20 to 25
percent in the country.
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