Brussels, 17/12/2014 (Agence Europe) - On Wednesday 17 December, the WTO dispute settlement body agreed to set up a special panel to examine the EU's complaint against the tax scheme Brazil applies (tax exemptions or reductions) to the automobile, information and communication technology (ICT) and other sectors (DS472).
The EU complaint was formally lodged on 31 October after the failure of the bilateral consultations with Brazil, requested in December 2013 (see EUROPE 11190).
The EU criticises Brazil for exempting its national producers from part of the high taxes imposed on several of Brazil's industrial sectors - such as automobiles, ICT and machinery - by way of selective exemptions or reductions. In the EU's view, these advantages lead to a higher tax burden for imported products and create incentives to source locally in Brazil. This practice is discriminatory and favours import substitution.
By way of example, the EU criticises a 30% increase in the tax on motor vehicles that has been applied by Brazil since 2011, while Brazilian-produced cars are exempt. This tax, which was due to expire at the end of 2012, was then extended for five years under another form.
The EU is also targeting tax exemption schemes for Brazilian companies that respond to certain export objectives, contrary to the prohibition on export-contingent subsidies.
In addition, the EU is concerned about Brazil's introduction of measures aiming to cover economic sectors of major importance for EU trade, like the automobile sector. (EH)