Brazilian airlines shaken by Ireland tax haven listing
By Anthony Boadle
BRASILIA, Sept 19 (Reuters) - Brazilian airlines are up in arms over a decision by Brazil's tax authority to list Ireland as a tax haven, which means about 1 billion reais ($306 million) in new taxes on aircraft leases for carriers struggling to regain profitability.
"The impact is brutal," said Eduardo Sanovicz, head of Brazilian airline association ABEAR, who will meet on Tuesday with tax authorities in Brasilia to try to reverse the surprise tax decision taken without consulting the airline industry.
Sanovicz said 60 percent of the 520 aircraft flying commercially in Brazil are leased from companies registered in Ireland, where they enjoy favorable tax rules.
Brazil's tax authority announced on Thursday it was adding Ireland, Austria, Curaçao and Saint Martin to its list of countries denominated as tax havens.
Companies based there will have to start paying a 25 percent tax rate on transactions with Brazilian companies, costing airlines about 1 billion reais ($306 million) on leasing contracts that are signed for up to 10 years, Sanovicz said by telephone.
Shares of carrier Gol Linhas Aereas SA fell 12 percent last week on the decision.
Brazilian airlines are reeling from high jet fuel costs and the drop in demand for air travel due to Brazil's two-year recession, and say they have no room to pass additional taxes along to ticket prices.
The companies complain jet fuel accounts for 37 percent of airfares compared to an average 27 percent worldwide, mainly due to the ICMS sales tax collected by Brazilian states. Continuación...