MercoPress. South Atlantic News Agency

Brazil to drastically cut dairy imports from Mercosur and ease taxes to promote domestic production

Dairy Imports from Mercosur countries more than doubled in twelve months

Brazil is planning to curb dairy imports from Mercosur countries. In the next few days, a decree will be published that will change the rules for tax benefits for dairies, agro-industrial companies, and cooperatives that participate in the Ministry of Agriculture’s milk program PMLS. The objective is to reduce tax incentives for companies that purchase dairy products from abroad.

Under the current rule, companies that participate in the program can use up to 50% of the presumed PIS and Cofins credits related to the purchase of milk from producers to write off other federal taxes or receive a cash refund. In return, at least 5% of the value of these credits must be invested in projects to increase the competitiveness of domestic production.

The Brazilian government is expected to review this point and limit the benefit of using 50% of the presumed credits to industrial companies and cooperatives that buy only domestic production. Companies that import milk will have to follow the standard taxation, with only 20% of these credits being used.

The demand was presented in September by the Brazilian Confederation of Agriculture (CNA) and the Brazilian Cooperative Organization (OCB). For the organizations, it’s inconsistent to give tax benefits to those who promote foreign production by importing dairy products.

Last month the Minister for Agrarian Development, Paulo Teixeira, told farmers in Rio Grande do Sul that a “tax measure” would soon be published to help contain the crisis in the dairy sector.

An industry source said the change could disrupt the planning of companies with ongoing projects. According to the source, the measures will last for two years, and the use of credits is priced into operations.

According to the federal government’s ComexStat platform, imports of milk and dairy products reached 159.4 thousand tons from January to August this year, twice as much as the 64.4 thousand tons seen in 2022. The increase in imports has compressed prices paid to Brazilian producers, culminating in widespread protest among market players.