Minas Gerais state reverses Vale’s tax injunction

Brazil’s Minas Gerais state has revoked an injunction obtained by Vale against a new tax on mining.

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Brazil’s Minas Gerais state has revoked an injunction obtained by Vale against a new tax on mining.

The Brazilian miner awarded the preliminary injunction last week and suspended Vale’s obligation to pay the new tax, called TFRM.

The state’s Court of Justice reversed the decision late on Monday.

Valid from May 2012 onwards, the tax is equivalent to one UPF (standard tax unit) per tonne of produced material.

For 2012, Minas Gerais’ UPF is set at 2.32 Reais ($1.13), up from 2.18 Reais in 2011.

Vale had also filed a legal action against the TFRM tax in Brazil’s northern Pará state, but the local Court of Justice there is yet to make a decision on the matter.

The company considers TFRM as an unconstitutional tax as it claims state governments are not allowed to subject mining activities to fiscal control, only the federal government.

It did not comment on the latest court decision.

Pará’s TFRM is equal to three UPFs per tonne of produced mineral.

The state’s UPF for 2012 is at 2.30 Reais, resulting in a 6.9 Reais TFRM tax in the year.

In the case of bauxite, Pará’s TFRM tax is set at 0.5 UPF per tonne of produced material, which equates to 1.15 Reais per tonne in 2012.

Industrial support
Brazil’s industrial confederation, Confederação Nacional da Indústria (CNI), has also filed a legal action with the country’s Supreme Federal Court (STF) asking for the suspension of the TFRM tax imposed by Pará, Minas Gerais and Amapá states this year.

As Vale, CNI claims the tax is unconstitutional and highlights the distortion between takings from the TFRM tax and inspection costs.

“Unlikely a duty, a tax assumes a narrow relation between the expenditure of the state government while inspecting business activities,” CNI’s juridical manager said in a statement on June 5.

“The [TFRM] tax masks a duty,” he concluded.