Govt rejects Aesbe's bid for federal tax cut on sanitation projects

Monday, June 6, 2011

Brazil's federal government has rejected a proposal by state sanitation companies association Aesbe for federal tax cuts on basic sanitation services, Álvaro José Menezes, president of Alagoas state water utility Casal, told BNamericas.

While the cities ministry had initially approved the measure, negotiations with the federal revenue department regarding eliminating taxes under the PIS social integration and Cofins social security programs have come to a dead end, according to the executive.

"The exemption has not happened and it will not happen soon," Menezes said, adding, "The current way public resources are managed is too convenient for governments to make a change."

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Around 25 state water utilities began negotiating with the cities ministry in April, arguing that reducing taxes would allow them to invest more in sanitation projects.

State utilities were charged 7.9bn reais (US$5.0bn) on PIS and Confins taxes from 2000-2008, during which period they invested 12.2bn reais. A tax break would have allowed the utilities to spend at least 20bn reais to improve water and sanitation, according to the executive.

Álvaro José Menezes is a member of Aesbe's fiscal committee. Aesbe's current president is Abelardo de Oliveira Filho, who is also president of Bahia state water utility Embasa.