Until now, tuition fee payments made to overseas educational institutions have been tax-exempt. However, the Ministry of Tourism announced last year that it would be introducing a levy of between 6.38% and 33% on payments made for services classified as personal spending abroad.
“This new tax will have a big impact in the market, reducing the number of students travelling abroad”
It was announced this week that the tax will stand at 25%, but education agency representative body Belta and a number of tourism organisations are continuing to lobby for it to be lowered, after estimating their industries could lose as much as US$1.6bn if the tax is set as 33%.
Government authorities are meeting this week to finalise the arrangements, but a spokesperson for Embratur, Brazil’s tourism board, said that accommodation expenses; transport and studies programmes will all be taxed at the same rate.
Speaking with The PIE News, education agencies predicted the tax will be a blow to the outbound market, which has already seen declines in student numbers due to the declining value of the real in the last year.
“This new tax will have a big impact in the market, reducing the number of students travelling abroad,” predicted Tereza Fulfaro, director of academic programmes at CI. “It’s a shame as Brazilians for the last years had learned the importance of doing exchange programmes abroad.”
She added that students will feel the increase the most. “Unfortunately the tax is so high (at least as far as we know) that students will end up paying for this cost either through a change on price list made by schools or administrative fees from agents in Brazil.”
“The concept of the tax is to charge who is receiving the resource abroad – it’s clear in the law description,” explained Marcelo Melo, CFO of Belta, which has more than 50 agency members representing around 90% of the total outbound study abroad market.
“The government believes that the schools and overseas suppliers are going to afford for the taxes,” he added, but predicted that in reality, students are likely to foot the bill.
“Brazilians are quite sensitive to any price increase,” he warned. “It will affect for sure in the short term.”
“No question it will be a terrible time for agents, schools, foreign providers in a market that has already suffered with approximately 45% of devaluation of our currency in the last year”
Echoing his concerns, José Carlos Hauer Santos, president of STB, said: “We don’t see providers accepting this new situation, so we have to charge the students.”
“If the prices rise by 25%, surely the impact will be quite big and the numbers will go down dramatically,” he forecasted.
Agencies, many of which have reportedly seen a dramatic fall in sales this year as the result of the real dropping to as low as four to the dollar, may be forced to adapt to the drop in student numbers through restructuring or redundancies, warned Carlos Robles, director of IEP Brazil.
His agency saw a 35-45% drop in sales in 2015, which led to the company being forced to make layoffs and carve out a new niche for itself, focussing on high school promotion and sales.
“To me, the Brazilian government is taxing the consumers twice with the same taxes and I wonder if this is legal,” he commented. “No question it will be a terrible time (and year) for agents, schools, foreign educators providers in a market that has already suffered with approximately 45% of devaluation of our currency in the last year.”
Negotiations regarding the level of tax to be implemented are still ongoing, and the Ministry of Tourism said in a statement that it is “closely monitoring the negotiations”.
“Recognising the importance of tourism sector for the Brazilian economy, responsible for about 3.1 million jobs, the Ministry of Tourism reaffirms its commitment to find a satisfactory solution to all actors involved in the negotiations,” a ministry spokesperson said.
While stakeholders await a decision on the level of taxation, Belta has notified its partner schools of the decision to end the tax exemption and asked them to cooperate with Belta Seal agencies – businesses marked with the association’s quality mark – on the matter.
“It will be very important that you are aware and raise awareness to help your partners in Brazil to overcome this situation at the present moment, until everything is defined and normalised,” the association’s board wrote in a letter to partners.
“Belta, on behalf of its associates, asks for your comprehension and asks for your support to your Belta Seal partners in this critical moment.”