Travel and tourism leaders in Brazil engaged in a burst of celebratory self-congratulations last week after it had waged a furious campaign and effectively killed a 25 percent tax that would have affected travel packages purchased abroad by tour operators—with the cost passed along to consumers or absorbed by the operators themselves. The episode triggered a never-before-seen demonstration of outrage on the part of the industry, warranting special meetings between government officials and industry leaders that received non-stop attention on the part of the news media. So important had the issue become in less than two months that the country’s Minister of Tourism, Henrique Eduardo Alves, decided to forego formality and release immediately, via Twitter the news of a provisional measure eliminating the tax.
What started the controversy is that Brazil’s federal government chose last December not to renew a tax exemption on bank transfers/remittances of funds abroad. The action ended a policy of exempting international bank transfers of up to 20,000 reais (about $5,300 at the current exchange rate) from a 25 percent levy on one’s income tax return. The exemption, which was approved by Brazil’s Department of Federal Revenue (it is commonly referred to as Receita Federal), had been in effect since 2011.
By early last week, Congress had passed and President Dilma Rousseff had signed into law the provisional measure reducing the tax on remittances abroad from 25 percent (a de facto 33 percent by the time other charges are incorporated) to 6 percent (an effective 6.38 percent)—the same as credit card purchases made by Brazilians abroad.
Did the tax and/or its provisional elimination have any impact on business and will its provisional elimination have any impact on future business? We posed the questions to Celyta Jackson, vice president of RDP, Inc., a Miami-based global marketing and communications firm who has extensive experience with the Brazilian market (she had earlier predicted to the Inbound Report that Congress would likely take action on the 25 percent tax by the first week of March, which is what happened), who told us: “I don’t believe we’ll see a surge in Brazilian spending in the U.S. because of the reduction. The 25 percent tax was in place for only two months. Not truly long enough to impact travel pricing severely or have dire consequences for jobs.”
Then, echoing a theme struck in different news accounts of the development, Jackson said, “What is important to me is what I see as a new maturity from BRAZTOA (Brazilian Tour Operators Association)—learning to become effective advocates for the tourism industry and to ‘play nice’ with government … channeling change through law and reason can work in Brazil,” adding, “Braztoa must continue to be a watchdog and pro-active advocate for the industry. I believe they will be.”
The celebratory tone is likely to be heard and repeated many times over next week (March 15-16) at the FÓRUM PANROTAS in São Paulo. Sponsored by the trade publication, PANROTAS, the forum is recognized as “the” industry event each year, attracting about 1,500 leaders from every sector of the travel and tourism industry, as well as government officials. (For more information, visit www.panrotas.com.br/forum.)