Car, soda, beer: see what will be taxed by the “sin tax” in the tax reform

Coal is now included in the list of products and services that will be taxed by the Selective Tax (IS) — known as the “sin tax” — in the new consumption tax collection regime.

Fossil fuel was included in the latest version of the complementary bill that regulates tax reform (PLP 68/2024), approved by the Chamber of Deputies, last Wednesday (10).

In the version of the PLP that the government sent to the National Congress in April, oil, natural gas and iron ore were already listed. The text provided for a 1% “sin tax” on the extraction of these minerals. However, the PLP rapporteur, federal deputy Reginaldo Ribeiro (PT-MG) reduced the rate to 0.25%.

In addition to including coal and reducing the taxation of mineral goods, the final version added — in comparison to the Executive’s text — electric vehicles, prediction contests, such as lotteries and sports betting, and fantasy games. Ribeiro, on the other hand, excluded trucks.

Alcoholic beverages, sugary drinks such as soft drinks, cigarettes, combustion-powered vehicles, boats and aircraft remain in the text. Tax lawyer Mariana Valença explains what the Selective Tax is.

“The Selective Tax is a new tax levied on the extraction, production, marketing and import of goods and services that cause harm to health and the environment. The objective is to increase the value of goods and services that are harmful to health and the environment, having an extra-fiscal function of taxation”, he points out.

This means that, in addition to being taxed by the Contribution on Goods and Services (CBS) — which replaces IPI, PIS and Cofins — and by the Tax on Goods and Services (IBS) — which replaces ICMS and ISS —, the products and services above will be taxed by IS.

Leader of the PDT in the Chamber of Deputies, Afonso Motta (RS) believes that the rules surrounding the new tax are positive, although he finds the issue controversial. “It seeks to establish something that we know in Brazil is still somewhat sensitive,” he says.

He believes that taxing the consumption of products that are harmful to health and the environment is a good thing. “I don’t intend to say that he (IS) is adjusting everything, but he is starting to provide a direction, a way of thinking, of doing tax justice.”

Immunity

As already foreseen in the project sent by the government, exports, operations with electricity and telecommunications are exempt from IS, which also cannot be levied on public road and subway passenger transport, nor on goods and services with a 60% reduction in the standard CBS and IBS rate.

The Selective Tax will also not be applied to inputs in the industrial process, avoiding the problem of cumulation. In addition, food will not be taxed by the IS.

Check out the list below

• Education services;
• Health services;
• Medical devices;
• Accessibility devices suitable for people with disabilities;
• Medicines;
• Food intended for human consumption;
• Personal hygiene and cleaning products mostly consumed by low-income families;
• Agricultural, aquaculture, fishing, forestry and extractive plant products in natura;
• Agricultural and aquaculture inputs;
• National artistic, cultural, event, journalistic and audiovisual productions;
• Institutional communication; Sports activities;
• Goods and services related to sovereignty and national security, information security and cybersecurity.

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