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Volkswagen Criticizes The Selective Tax, Arguing That It Will Increase Prices And Make It More Difficult For The Middle Class To Access New Cars, Keeping Old And Polluting Vehicles On The Streets.
Volkswagen expressed its dissatisfaction with the Selective Tax, highlighting that the implementation of this tax may raise the prices of new cars. The automaker argues that this measure would make it difficult for the middle class to access state-of-the-art vehicles, which would result in older and less efficient cars remaining on urban roads.
In addition to creating a negative impact for consumers, the Selective Tax, also known as the Sin Tax, raises additional concerns. This type of taxation is seen as a significant obstacle to the renewal of the automotive fleet. Consequently, this could have serious environmental implications, as it prevents the replacement of old vehicles with newer and less polluting models.
Distortions Of The Selective Tax In The Automotive Sector
Ciro Possobom, CEO of Volkswagen in Brazil, listed a number of distortions that the incidence of the Selective Tax (ST) would bring to the automotive sector, especially with the tax reform on the horizon, as reported by CNN. According to VW’s executive, including flex-fuel vehicles in the taxation that the federal government intends to establish would make it more difficult for the middle class to access new cars, as the prices of vehicles would increase, hindering the renewal of the country’s automotive fleet.
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Possobom states: ‘With the application of the selective tax, the tax burden on vehicle sales in Brazil would become higher than that observed in the United States, China, and also in Europe […] Therefore, we advocate for the exclusion of the selective tax for automobiles.’ It is worth remembering that in Brazil, automakers often complain about the high tax burden imposed on automobiles, which varies between 35% and 50% of the final vehicle value, depending on the product.
Impacts Of The ‘Sin Tax’ On The Automotive Industry
The Selective Tax intends to tax items from the automotive sector, taking into account the emission of pollutants in its production chain, which means penalizing the product based on the process by which it was manufactured. Therefore, it is being informally nicknamed the ‘sin tax’, where each product would pay for its part in pollutant emissions during its manufacture. However, the government decided to exempt trucks and buses from this penalty. In Congress, the debate about taxation initially did not include electric and hybrid cars, nor did it consider including combustion vehicles. Still, the amendment to include these automobiles deteriorated the relationship between the government and automakers.
Possobom emphasizes that applying this tax will perpetuate the presence of old vehicles on the streets, as cars that are 20 years old emit 20 times more pollutants than contemporary models. He also stresses the concern that this will delay the large-scale adoption of electric and hybrid cars, compromising efforts to reduce pollutant emissions.
Industrial Development Prospects With The ST
Uallace Moreira, Secretary of Industrial Development, counters the view that the Selective Tax will increase vehicle prices, arguing that this tax will be offset by Green IPI credits, which automakers will be able to use after qualifying for the Mover Program. According to him, this measure aims to encourage the adoption of sustainable practices in automotive production, without burdening the end consumer. In this sense, the goal would be to promote innovation among companies for the adoption of cleaner and more efficient technologies.
Still, the automotive sector’s confidence in the effectiveness of this mechanism does not appear to have been fully achieved. The concern over the high tax burden, already considered quite heavy, remains a point of tension between automakers and the government. The delicate relationship between fostering industrial development and ensuring a fair allocation of taxes still requires greater clarity and negotiation to reach a satisfactory consensus for all parties involved.
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