Bloomberg News

Brazil Supreme Court Suspends Higher Tax on Imported Cars

October 20, 2011

(Updates with car prices in fourth paragraph.)

Oct. 20 (Bloomberg) -- Brazil’s Supreme Court suspended until mid-December a higher tax on imported cars imposed in September to protect local manufacturers from cheap import from China, Korea and elsewhere.

The court ruled today that the tax increase was illegal because the government failed to give 90 days notice as required by law, Supreme Court President Cezar Peluso said. The injunction allows the government to start charging the tax 90 days after the levy’s publication date of Sept. 16. The Finance Ministry declined to comment in an e-mailed statement.

President Dilma Rousseff’s administration, concerned that a surge in imports from China and elsewhere will cause job losses, last month raised the so-called industrial products tax by 30 percentage points on all cars with a high proportion of foreign- made parts. Brazil, the fifth-biggest car market, is important for China’s automakers as they start a world expansion. Chery Automobile Co. Ltd. and others are trying to follow Korean makers such as Kia Motors Corp. and Hyundai Motor Co. that have become global players.

Before the tax increase in September, a Chinese Chery QQ with air-conditioning, power steering, air bags, CD player and electric windows cost 23,990 reais ($13,440) in Brazil, including import tariffs. That was 300 to 2,100 reais cheaper than the most stripped-down models -- without most of the Chery’s features -- of Volkswagen AG’s Gol G4, General Motors Co. Chevrolet Celta or Ford Motor Co.’s Ka in Brazil, according to data on the companies’ websites.

--Editors: Harry Maurer, Robert Jameson

To contact the reporters on this story: Arnaldo Galvao in Brasilia at agalvao1@bloomberg.net; Matthew Bristow in Brasilia at Mbristow5@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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