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UPDATE 3-Brazil renews tax breaks for "green" vehicles

2009-11-24 22:59:43 GMT (Reuters)
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* Brazil confirms tax breaks for "green" vehicles

* Tax breaks for certain cars will last until end of March

* Truck tax breaks will last until June 2010 (Adds context and details on estimate of revenue lost due to "green" vehicles' tax breaks)

By Isabel Versiani and Ana Nicolaci da Costa

BRASILIA, Nov 24 (Reuters) - Brazilian Finance Minister Guido Mantega confirmed on Tuesday that the government will extend tax breaks to certain vehicles deemed environmentally friendly.

The government will keep a tax break on flex-fuel cars with up to 1-liter engines until the end of March 2010 and extend tax breaks for trucks until June 2010. Flex-fuel cars can run on any mixture of gasoline and ethanol, which emits fewer greenhouse gases.

Taxes on traditional gasoline-run cars will rise from December.

"We want the automobile industry in Brazil to consolidate and to bring new environmental technologies to the country " Mantega told reporters at a news conference in Brasilia.

Environmental issues have been gaining importance in the campaign ahead of next year's presidential election in Brazil.

A government source had earlier informed Reuters of the pending announcement.

The government will lose an estimated 1.3 billion reais ($751 million) in revenue as a result of the measure. But taking into account potentially higher car sales, saved jobs, and unemployment benefits not paid, the government would come out even, Mantega said.

"If we look at the whole package, we may neutralize this (tax) loss," Mantega said.

The country's automobile market has been one of the strongest in the world in recent months as government tax incentives lowered car prices and lured consumers into showrooms.

Brazil, Latin America's largest economy, is a major market for Italy's Fiat, Germany's Volkswagen AG and U.S.-based General Motorsand Ford Motor Co.

In a similar vein, the government announced in October the three-month extension of tax breaks on energy-efficient home appliances in a bid to boost consumption.

Tax breaks and low-cost financing have fueled consumer demand and helped pull Brazil out of a brief recession.

The economy is expected to grow 0.2 percent this year and 5 percent next year, according to the latest weekly central bank survey of leading financial institutions. (Editing by Raymond Colitt, Leslie Adler and Jan Paschal) ((ana.nicolacidacosta@thomsonreuters.com; Reuters Messaging:

ana.nicolacidacosta.reuters.com@reuters.net;

+55-61-3426-7027))

 
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