Brazil Finance Minister discusses Selective Tax negotiations

Finance Minister Dario Durigan stated that negotiations are ongoing regarding the Provisional Measure (MP) to create the Selective Tax (IS), also known as the ‘sin tax’. The government had initially aimed to release the measure in September or by October 2 to comply with the 90-day rule, which would set the tax collection start date for January 1, 2027.

The Selective Tax is a federal levy designed to increase the cost of goods and services deemed harmful to health or the environment. Expected targets include tobacco, alcoholic beverages, and soft drinks, though the final list has not been published. While the economic team suggests the tax will not significantly increase the overall tax burden for most sectors, it is intended to be extrafiscal, aiming to discourage consumption of certain products.

Critics and affected sectors have raised concerns that the tax could be highly revenue-generating and might inadvertently stimulate piracy and illegal markets. The government is currently working to reach agreements with affected sectors to prevent political friction during the implementation of the broader tax reform.