Brazil scraps tax on small parcels as Chinese platforms lose US and EU access

Brazil on Wednesday eliminated its federal import tax on small overseas parcels, moving in the opposite direction from US and European Union efforts to close a loophole that saw such Chinese retail giants as Shein and Temu expand rapidly.

The elimination will hurt the country’s tax base, but the levy on lower value shirts, electronics, toys and kitchen gadgets ultimately proved too unpopular among Brazilians ahead of the October 4 presidential election, forcing Brasilia to back down.

In an apparent attempt to minimise media exposure over a domestic scandal involving a bank recently closed by local authorities, which has implicated several of his allies, Brazilian President Luiz Inacio Lula da Silva has opted not to hold a signing ceremony for the legislation negotiated over weeks with Congress.

But in a video posted by his campaign on social media last week, he commented on the initiative, stating that its approval was a matter of social justice.

“The upper-middle class travels abroad, spends 2,000 dollars, and pays no tax. Why is it that when a person from the favelas … buys something for 50 dollars, they want to tax them?”

“It is simply a matter of justice … so that the Brazilian people can buy the things they need without anyone bothering them,” the president said.