Ethanol import tax takes effect in Brazil

A 20% tax on imported ethanol has taken effect in Brazil, according to Reuters.

The rules, which see the 20% penalty applied to volumes above a tax-free quota, came into force on 1 September.

Reuters reports that Brazil’s foreign trade chamber Camex has issued an official written resolution which states that the new rules will be valid for two years.

Brazil’s government has never taxed ethanol imports before, hoping to encourage the use of the biofuel worldwide and in turn boost exports from Brazil. Complaints from local producers about rising imports however, forced the government to change its policy.

Camex states that 600 million litres of ethanol will be allowed into Brazil each year tax free, broken down on a quarterly basis. As soon as imports exceed 150 million litres in any quarter, the 20% tax will take effect.

Significantly, the import restriction comes at a time when recent changes in local taxation have made biofuels more competitive with gasoline at fuelling stations, in turn boosting ethanol sales.

US ethanol producers are likely to be the most adversely affected by the new penalties, with almost all of Brazil’s ethanol imports coming from the country.