Brazil plans tax breaks for ethanol sector -paper

Reuters Aftrica
Thu May 31, 2012 3:07pm GMT

* Govt prepares package to stimulate ethanol production

* Ministries discussing tax breaks and fuel price hike

SAO PAULO May 31 (Reuters) - Brazil's government plans to cut taxes for its ethanol sector to stimulate production of the widely used biofuel, as ethanol output remains anemic after the 2008 financial crisis triggered industry consolidation, local papers reported on Thursday.

According to Brazil's Valor Economico financial daily, an unnamed, high-level source in the administration said that the government is drafting a package that will include the reduction or zeroing out of the so-called PIS/Cofins taxes, which account for about 12 centavos ($0.06) of the typical 1.87-real-per-liter price for ethanol in Sao Paulo.

The government is also studying a possible reduction of the IPI tax on machinery and equipment required in the construction of new ethanol mills, in an effort to boost future production of the fuel.

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