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ICMS in SP could increase by 300%, directly affecting bars, restaurants and consumers' pockets. The sector faces the risk of closures and mass layoffs while trying to negotiate with the state government. Without changes, the cost of meals will increase by early 2025.
Get ready for a direct impact on your pocket: eating out in São Paulo could become up to 7% more expensive by the beginning of 2025.
This is because the special regime of ICMS taxation, which has been reducing the burden on bars and restaurants for 31 years, is about to be phased out.
The sector, which employs more than 1,4 million people in the state, is racing against time to avoid a tax increase that could jeopardize the survival of thousands of businesses.
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What is happening?
The Federation of Hotels, Restaurants and Bars of the State of São Paulo (Fhoresp) revealed that the ICMS, currently set at 3,2% for the segment, could jump to 12%.
This represents an effective increase of 300%, raising the tax burden to 9,6%, even considering tax credits.
This change, scheduled to come into effect on January 1, 2025, will reflect the end of the decree that has guaranteed the tax benefit since 1993.
The impact will not only be on business owners.
According to Fhoresp, the transfer to the consumer will be inevitable, with an immediate increase in the cost of meals estimated at 7% or more.
This, according to Edson Pinto, executive director of the entity, will be aggravated by the fact that the sector has already absorbed inflation of 14% in the last four years.
What is at stake with the increase in ICMS?
In addition to the direct impact on prices, the possible increase in ICMS threatens job creation and encourages informality.
According to Fhoresp, the sector is responsible for around 5,7% of jobs in the state of São Paulo.
Without the special regime, São Paulo will have the highest taxation in the country in the food-out segment, surpassing states such as Minas Gerais and Rio de Janeiro.
Another critical point is the inability to dialogue with Governor Tarcísio de Freitas (Republicans).
According to representatives from the sector, the state government did not show any openness to discussing the issue, even after formal attempts at contact.
This has led to criticism about the lack of understanding of the economic importance of the sector.
Comparison with other states
The current ICMS tax rate for restaurants in São Paulo is one of the lowest in Brazil. See how it compares:
- Sao Paulo (SP): 3,2%
- Rio de Janeiro (RJ): 4%
- Minas Gerais (MG): 3% to 3,2%
- Paraná (PR): 3,2%
- Santa Catarina (SC): 3,2%
Without the special regime, the São Paulo tax rate will jump to 12%, exceeding the national average.
The decision also contrasts with other states that, despite facing fiscal crises, maintain incentives for the sector to ensure competitiveness.
What does the sector expect?
Entities such as Fhoresp, the National Federation of Collective Meals (Fenerc) and the Brazilian Association of Collective Meals (Aberc) have been mobilizing to raise awareness in the state government.
The continuation of the benefit is seen as essential to preserve jobs, avoid price increases and guarantee the quality of food served in public contracts, such as school lunches and meals in hospitals.
“If the government does not back down, the negative effects will be unprecedented for the São Paulo economy,” warns Edson Pinto.
The sector also fears that public contracts, which depend on competitive values, will be severely impacted.
An uncertain future for consumers and entrepreneurs
The outcome of this dispute is still uncertain, but one thing is clear: Consumers will be directly affected, paying more to eat out.
Meanwhile, the bar and restaurant sector is facing the biggest tax crisis in 30 years, with no guarantee of government support.
With this imminent change, the question remains: will the government of São Paulo prioritize fiscal balance or the preservation of a sector that employs millions of people and moves billions in the economy?
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