🇧🇷 Tax reform: Pernod Ricard

Hey, I’m Douglas, Editor-in-Chief of the Brazilian Tax Reform Portal 🇧🇷.

1) Alcohol

Carlos Eduardo Lopes, Pernod Ricard's Head of Taxes stated that preparing for the consumer tax reform project requires early analysis, defining strategies, and understanding both what is being done and the proposed changes. Carlos explained that he began the project at the beginning of the year, focusing on analyzing financial investments (read more)

In partnership with ROIT, they used the Tax Reform Calculator and conducted a complete survey and quantification of the potential impacts, both on supplier pricing and on the pricing of their own products and the supply chain as a whole:

"With the results of this work, we already had an initial analysis of its importance, a first factor in convincing senior leadership of the relevance of this project and its impact on our business," he stated.

After this stage, the team began raising awareness and disseminating information among the company's management and directors, emphasizing that this is a corporate project, directly linked to the business strategy. The project was structured in a unified manner, but with two distinct committees. Cadu leads the Technical Committee, which analyzes the legislation.

Furthermore, during the preparation process, an unexpected discovery brought a new level of attention to a company's strategic planning: the importance of suppliers registered under the Simples Nacional (Simplified Tax Regime):

"We already expected the impacts to come; we wanted to quantify them, but the volume of suppliers I have under the Simples caught my attention. I didn't have that picture before the calculator."

In this regard, Caroline Souza, CFO of ROIT, emphasized that the reform still faces several issues to be resolved, but the lack of data limits progress, allowing it to only go "to a certain point."

Despite the entire process undertaken to prepare for the reform, Carlos stated that there is still no legal certainty regarding the regulation of the consumption tax reform: "A lot is yet to come, and everything we need to do, we've been able to do to a certain extent. From there, it remains empirical. No one has any certainty or any solid foundation regarding the outcome."

Selective Tax

Carlos explained that, even with the application of the Selective Tax on beverages, still with an undefined rate, the reform brings more transparency and fairness to the tax system, allowing consumers to know exactly how much they are paying in taxes.

Furthermore, he explains that it is extremely difficult to calculate the effective tax rate on beverages in the current scenario. According to him, the complexity increases even more for products like wine and spirits, which have a wide range of prices:

"When you look at wine, there's a huge variation, because wine has a range of prices that range from 10 reais to thousands of reais, as do some spirits, like super-premium whiskey versus a popular whiskey." 

This wide range of values, combined with mechanisms such as tax substitution, makes it virtually impossible to define an effective tax burden:

"When this price range is very large and you have factors such as tax substitution in the mix, the effective tax burden becomes impossible to determine." 

🇧🇷🔍 Brazil is changing. Are you watching closely?

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