Brazil Drops Controversial Online Purchase Tax Proposal

A proposal to impose a 20% import tax on Brazilians' small online purchases from abroad was removed from a sustainability tax incentives bill for automakers. This removal postponed the Senate vote to Wednesday. The measure was unpopular among consumers and faced resistance from President Lula’s government, despite local retailer support.

A proposal to tax Brazilians' small online purchases from abroad was dropped from a bill on sustainability tax incentives for automakers on Tuesday, prompting the nation's Senate to postpone a vote on the wider bill.

Senators were scheduled to vote on the bill, which was approved last week by Brazil's lower house, but decided to push talks to Wednesday after senator Rodrigo Cunha, the rapporteur of the bill, removed the unpopular proposed 20% import tax for online purchases under $50. Cunha said it is "not the ideal moment" for the measure and called for a separate vote.

But Senate President Rodrigo Pacheco told journalists that the proposal should be debated by the whole Senate to reflect the will of the majority. Pacheco argued it would be reasonable to tax international online purchases to ensure fair competition between local and international businesses.

President Luiz Inacio Lula da Silva's government has sought to balance public spending with more tax revenue, although he previously expressed opposition to the import tax proposal. Last year, Lula's administration tried to implement a version of the online sales tax, which is supported by local retailers amid growing presence of Asian e-commerce giants in Brazil, but he gave up after strong backlash.

The proposal, which is facing intense consumer backlash, would affect global online retailers such as Alibaba's AliExpress, Sea's Shopee and fashion retailer Shein, which have gained a huge presence in the Brazilian market in the last few years.