Brazil tax reform threatens cultural incentive laws

A constitutional amendment (EC 132) that creates a dual VAT system in Brazil will eliminate the ICMS and ISS taxes, preventing states and municipalities from granting new cultural and sports incentives. The change endangers local incentive laws that currently mobilise about R$ 1.2 billion annually for the cultural sector.

The cultural sector, coordinated by the Fórum Brasileiro pelos Direitos Culturais (FBDC), responded with Proposal of Amendment to the Constitution (PEC 13). Backed by nearly 200 parliamentary signatures, the proposal seeks to amend article 9 of EC 132 so the IBS governing committee can authorise indirect cultural and sports funding through IBS credits. If approved, each state and municipality could draft its own incentive legislation.

Deputy Aureo Ribeiro (Solidariedade‑RJ) has accepted the proposal and it will be reported by Deputy Reginaldo Lopes, a principal author of the tax reform. Lawyers warn that the loss of ICMS‑based incentives could jeopardise billions of reais in cultural financing unless the amendment passes.