Government attempts to unify Brazil's taxes on interstate trade of imported goods, and end the so-called "war of the ports," took another step forward Tuesday as the Senate's Committee for Economic Affairs (CAE) approved the unification proposal.
The CAE called that the proposal urgently be put to the Senate for vote.
The proposal, Resolution 72, was approved despite weighty opposition from state governors Raimundo Colombo, of Santa Catarina, and Renato Casagrande, of Espirito Santo.
These states have the most to lose from the proposal, which will unify the ICMS at a national rate of 4%, disabling individual states from offering tax incentives and boosting imports at their ports.
Despite pressure from these governors, the CAE approved that the tax unification be implemented in January 2013.
However, Brazilian companies reliant on the domestic market, such as steel and petrochemical producers, have long complained about the competition between state taxes, arguing it is unconstitutional and hurts local industry.
Denise Naranjo, director for foreign trade affairs at Brazilian Chemical Industry Association, stressed Monday in an industry first quarter report that a unification of the ICMS was "crucial to reverse the rising deficit in the chemical sector."
Analysts from Barclays Capital reiterated their view that the impact of the proposal will not be as stark as many are expecting.
"Although we recognize that noise surrounding the topic is likely to reduce import appetite, we see very limited impact for the industry in 2012," they said in a note Tuesday.
"We see high risks of the implementation of Resolution 72 frustrating expectations," they added.
