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Brazilian footwear industry regrets presidential veto to maintain payroll tax exemption

Nov 27, 2023 Brazil

National footwear manufacturers were surprised by President Lula da Silva's veto to maintain the payroll tax exemption policy and expect a loss of 20 000 jobs in 2024 in the industry

The Brazilian Footwear Industries Association (Abicalçados) expressed surprise at the presidential veto to maintain the payroll tax exemption policy for the 17 sectors that employ the most people in the country’s economy. Abicalçados believes this decision will have a negative impact on the sector, adding an extra tax burden of 720 million Brazilian reais per year for manufacturers, which will affect production and, consequently, employment.

According to a survey carried out by the industry’s organization, 20 000 jobs may be at stake in 2024. “Taxing job creation goes against the country's desired reindustrialisation policy”, commented Haroldo Ferreira, Executive President of Abicalçados.

For the association, the tax exemption is a policy that has been helping to maintain jobs in a sector that has been facing difficulties, especially considering the tax exemption for international shipments from digital platforms. “What was already complicated is likely to get worse next year if the measure is not reversed in Congress. We are taking steps to prevent the worst from happening”, he concluded.

During the press conference held at the Brazilian Footwear Show (BFSHOW) on the 22^nd of November, when the industry announced that it expects footwear production to grow by 2.2% next year, after a 1.1% drop this year, Ferreira had already expressed concern about the difficult situation lived in the sector. “We have high production costs, an unheated market, both here and abroad, and fierce unfair competition from international platforms, which today are exempt from any import tax on shipments of up to 50 dollars”, he said at the time.

About Payroll Tax Exemption

Introduced in 2011, the payroll tax exemption is a policy aimed at maintaining jobs in the sectors that employ the most people in the country. This mechanism allows the 20% employer social security contribution levied on payroll to be replaced by rates varying between 1% and 4.5% on gross revenue. In the case of the footwear industry, the rate is 1.5%.

Image Credits: Mateus Campos Felipe on Unsplash

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