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Brazil: new foreign tuition tax to hit outbound market, agents predict

Education agencies in Brazil have voiced their concern following the announcement of a new tax on overseas payments that will include tuition and accommodation fees, which they say will raise the cost of study abroad for Brazilian students.

Photo: Flickr/Benjamin Thompson.

"The Brazilian government is taxing the consumers twice with the same taxes and I wonder if this is legal"

Until now, tuition fee payments made to overseas educational institutions have been tax-exempt. However, the Ministry of Tourism announced plans last year to introduce 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, whose more than 50 agency members represent 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”

Echoing his concerns, José Carlos Hauer Santos, president of STB, said: “We don’t see providers accepting this new situation, so 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 already reported dramatically falling sales this year as the real dropped to as low at four to the dollar, may be forced restructure or make redundancies, warned Carlos Robles, director of IEP Brazil.

His agency saw a 35-45% drop in sales in 2015, he said, forcing the company to make layoffs and carve out a new niche for itself, focusing 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, Belta has notified its partner schools of the impending end to 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.”

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16 Responses to Brazil: new foreign tuition tax to hit outbound market, agents predict

  1. It is a shame that Brazil after an excellent job supporting and instigating studies abroad, through government programs, starts to go back-ways. It is a very price sensitive market and with the currency impact caused by the dollar increase, unfortunately this is not looking any promising.

  2. Schools should give serious consideration to reducing fees charged Brazilians by 20-25% to make up for this tax. Schools that do so will certainly be building market share for the future. The actual cost to the schools will be negligible. These taxes have been in place before and do not last for many years. Times such as these require aggressive and smart management capable and willing to make those hard decisions. If drastic action on the tuition front is not taken now, the results are not going to be pleasant.

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