The Brazilian government does not want the economic crisis expand in the country. On April 3, President Dilma Rousseff announced new tax cuts and other stimulus measures that will benefit 15 industry segments. The new package, which complements the one previously announced, is intended to boost the economy and help protect the country’s struggling industries. According to some industry analysts, the new measures will positively impact the information, communications and telecommunications (ICT) sector and contribute to its growth.
The government extended measures designed to reduce several taxes that will affect the ICT sector. Announced last August, the first stimulus package called “Brasil Maior” included a payroll tax exemption on pension contributions in the IT sector. Brazilian employers used to be required to make social security contributions at a level equal to 20% of their payroll, but Brasil Maior dropped this requirement to 2.5% of company revenues. Now, with the new stimulus package, the government has further reduced the employer social security contribution to 2% of company revenues.
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The most relevant impact of the stimulus package might be the formalization of the Brazilian ICT sector. Currently about half of all IT employees are not hired under labor law rules. The Brazilian Association of Information Technology and Communication (Brasscom) estimates that there are 1.2 million people working in the ICT sector. “We believe that 60% of the informal workforce will become formalized under the new incentives,” said Edmundo Oliveira, Brasscom’s director of regulation.
As a result of the tax cut program, Brasscom estimates that the proportion of formal contracts will reach 80% by next year and 90% by 2015. “There will be several advantages for companies, such as lower costs and reduced labor proceedings,” Oliveira added. This may help Brazil’s ICT market reach U.S.$300 billion to $400 billion by 2022, which would help the country climb to fifth place among the world’s most powerful economies in 10 years.
The federal government has also relieved taxes (IPI and PIS / Cofins) on domestic equipment and investments in the construction of the telecommunications network infrastructure related to the National Broadband Plan (PNBL).
“Any tariff reduction is positive. Building a telecommunications network represents a huge investment for carriers, so this should be an important issue for them,” noted Teleco’s CEO Eduardo Tude.
The Minister of Finance, Guido Mantega, said the goal is to expand broadband Internet access and accelerate PNBL telecommunication investments. The government hopes to have broadband Internet reach 50% of urban households and 15% of rural households by 2014 and achieve the milestone of giving 60 million people individual mobile broadband access. Currently, only 47.2 million people have this type of access.
The Brazilian government is also looking to expand the fiber optic network in the country from 11,000 km (6,835 miles) to 30,000 km (18,641 miles).
The government also announced that it would reissue the 2015 One Laptop per Student project. Under the program, the government suspends taxes on contributions such as IPI, PIS / Pasep, Cofins and Cide from laptop manufacturers, both on the acquisition of raw materials and on related expenses such as marketing. The goal is to reduce the price of the equipment, allowing students from public schools to purchase laptops, thus promoting digital inclusion.
Another measure is the extension of tax exemptions on domestic purchases, and imports of goods and inputs for the semiconductor industry. The Padis program, which focuses on supporting technological development in the semiconductor industry, now also includes providers of strategic inputs for the production of semiconductors and displays, such as computer boards, LCD screens and LED.
In total, the incentive package will cost the Brazilian government U.S.$33.07 billion (R$ 60.4 billion) in 2012. The largest portion is the state development bank BNDES investments, which will expand subsidized lending by injecting U.S.$24.64 billion (R$45 billion) from the Treasury into the economy.
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