Japan, EU Win WTO Case against Brazil Tax

December 14, 2018

Tokyo--The World Trade Organization's Appellate Body has ruled that Brazil's preferential tax treatment of vehicles and electronic products made in the country violates WTO agreements, the Japanese government said Friday.

The decision was in line with a ruling made by a WTO dispute settlement panel that accepted claims by Japan and the European Union that Brazil's measure is inconsistent with WTO rules.

Judging that Brazil's tax measure violates WTO agreements banning discriminatory treatment between imports and domestically produced goods, the Appellate Body called on Brazil to take corrective steps.

Japanese trade minister Hiroshige Seko said in a statement that the WTO made it clear that any protectionist, market-distorting measure is unacceptable.

Brazil launched the preferential treatment in September 2011, aiming to boost industrial development.

After increasing tax on automobiles sold in Brazil by 30 percentage points, the country introduced a system to lower the tax rate depending on the use of domestically produced parts.

The EU and Japan demanded the WTO set up a dispute settlement panel in 2014 and 2015 respectively, complaining about Brazil's preferential tax treatment. The panel accepted the claims by Japan and the EU in August 2017, but Brazil appealed against the ruling.