IATA slams 'catastrophic' tax haven ruling in Brazil
(Story corrects name of IATA official to Cerda from Cerba in paragraphs 4, 11, 13)
BRASILIA (Reuters) - The International Air Transport Association urged Brazil on Thursday not to list Ireland as a tax haven, a decision that would increase taxes on aircraft leases for Brazilian carriers struggling to regain profitability.
In an effort to dissuade Brazilian companies from moving to tax havens, Brazil's government announced a week ago it would add Ireland, Austria, Curaçao and Saint Martin to its list of countries denominated as such, as of Oct. 1. Brazilian law requires companies registered in listed tax havens to pay a 25 percent tax rate on their contracts.
IATA, a trade association of the world's airlines, said Brazil was already a very expensive place for carriers to do business and the tax ruling would undermine efforts to compete with rivals in nearby Chile and Argentina.
"It will cause havoc and have a catastrophic impact on the ability of Brazilian airlines to become financially sound," Peter Cerda, IATA vice president for the Americas, said by telephone from Miami.
Brazilian airlines lease 60 percent of the 520 aircraft flying commercially in Brazil from companies registered in Ireland, where they enjoy favorable tax rules.
Listing Ireland as a tax haven would add 1 billion reais ($306 million) a year to the cost of leasing the aircraft, according to the Brazilian airline association ABEAR.
ABEAR is hoping to convince Brazil to reverse its decision or make an exception for aircraft leases, which have been tax exempt since 1996.
Association President Eduardo Sanovicz met on Wednesday with tax authorities. He gave them data projecting the costs the ruling would cause Brazilian carriers, hurting their competitiveness, he told Reuters by telephone. Continued...