By André Ricardo Passos de Souza for Money Times
In recent days, the agribusiness sector has been caught by surprise with a new tax on Agribusiness Chain Investment Funds, popularly known as Fiagros .
Published at the end of August, Provisional Measure no. 1.184, of August 18, 2023, has already been the subject of several studies and comments by many good people in the market and, precisely for this reason, we have refrained from providing technical details in this space regarding the possible “turbulence” and legal uncertainty that such a measure brings to the market and investors, in particular.
What we need to say now is that this measure leads to a reduction – with no relevant counterpart in terms of public revenue – in the amounts available for the private financing of agribusiness.
Thus, despite the fact that the taxation sought is practically neutral in relation to the Fiagros already listed and available on the market – most of them meet the new criterion of having more than 500 (five hundred) shareholders in order to enjoy the 20% Withholding Income Tax (IRFF) exemption on the payment of income to shareholders – the new taxation came at the very moment when the Safra Plan needs to take off.
Impact on the Safra Plan
The uncertainties created do nothing to help the federal government’s goal of making around R$435 billion available through the 23/24 Safra Plan, including public and private lines of financing for producers and family farming.
It should be remembered that a significant part of these funds comes from Fiagros, which, according to the Brazilian Association of Financial and Capital Market Entities – Anbima, represented issues of around R$5 billion in the first half of this year alone.
Thus, this “headwind” in the market for private financing of agribusiness could end up taking resources away from financing rural producers and, in the end, have the opposite effect to that sought by the government with the publication of the measure, reducing private financing for the sector, so that, in the end, more public resources are used to finance rural producers.
Who pays the bill?
In this respect, the biggest loser will certainly be the small producer, who is less able to access private resources and who needs greater availability of public resources and official credit transfers to finance his production, which ultimately generates income and employment.
Therefore, the tax revenue that the government is seeking with the measure, in practice, should have a “headwind” effect, with fewer resources available to finance agribusiness, which is breaking production records once again this year.
In this way, I sincerely hope that before the aforementioned provisional measure is converted into law, discussions in the National Congress can bring more rationality and “calm” to state agents, putting an end to these “headwinds” in the grain financing market so that tailwinds can blow again and help investors, producers and other market agents to operate with legal certainty, predictability and sustainability.
This is the least that can be expected for the financing of a sector that, according to the IBGE, grew by around 18% in the first quarter of 2023 alone, helping the job and income market and, therefore, making a decisive contribution to fiscal adjustment and public accounts in general, something so desired by a society that needs predictability to navigate towards a more sustainable, greener future that reaffirms Brazil’s position as a provider of food, fiber and renewable energy for more than 2 billion human beings in the very near future.
Available at: New tax on Fiagros should jeopardize the implementation of the 2023/2024 Safra Plan – Money Times