By Ludmila Cassio
Brazilian President Luiz Inácio Lula da Silva, of the leftist Workers' Party (PT), signed Provisional Measure 1,399/2026, published Wednesday, November 4, in a special edition of the Diário Oficial da União, Brazil's official gazette. The measure sets the rates of the so-called "sin tax," formally the Selective Tax (Imposto Seletivo). Collection starts on February 2, 2027, and the government expects to raise R$ 41.9 billion (Brazilian reais).
A provisional measure is a decree with the force of law that the president can issue and that later needs approval from Congress. The source notes a telling detail: the tax reform foresaw collection from January 2027, but the government held back the rates until after the presidential election.
Brazil's sin tax rates for 2027
According to the government, the Selective Tax was created by the consumption tax reform to discourage products that harm health or the environment. The rates defined for 2027 are:
- Cigarettes: 66.7%, plus a fixed R$ 3.50 per pack of 20.
- Distilled spirits (whiskey, vodka, gin): up to 24%.
- Cachaça and other sugarcane spirits: 20%.
- Common wines: 8%.
- Beer: 4.2%.
- Soft drinks and sugary beverages: 2.6%.
- Lotteries: 0.5%.
- Vehicles, aircraft and boats: rates based on power, efficiency and emissions.
The government's own projection in the 2027 federal budget is to collect R$ 41.9 billion from the new tax in a single year.
Who pays: the regressive tax problem
A consumption tax does not ask anyone's salary. A pack of cigarettes, a weekend beer, a glass of cachaça, the soda that comes with a packed lunch and a lottery bet cost the same for a rich person and for a worker earning the minimum wage. The difference is the weight on the budget: for low earners, each extra real on these prices takes a much larger share of monthly income. Economists call this a regressive tax, where proportionally those with less pay more.
Companies collect the tax, but part of the cost can be passed on to consumers, depending on the market. In practice, the source argues, those who feel it are the people in the checkout line.
No price increase? Only for now
The government says the 2027 rates were calibrated to keep the burden similar to the current IPI (Tax on Industrialized Products) and avoid an immediate price increase. But that rule applies only until December 2027. From 2028 on, the government is preparing permanent rules that may include higher rates for some products. The bill with the new percentages must be sent to Congress by May 31, 2027.
The government has also proposed a constitutional amendment (PEC) to keep charging IPI on these products in January. Without it, the Finance Ministry estimates a loss of about R$ 4 billion.
Why it matters: the health argument
The government justifies the tax by citing the costs of alcohol, tobacco and sugary drinks for the SUS, Brazil's public health system. The Health Ministry estimates spending of about R$ 153.5 billion a year linked to tobacco, and studies used by the government point to almost R$ 3 billion a year in diseases associated with sugary drinks.
Industry pushes back: the tax burden is already high, and more tax can mean less production, fewer jobs and more room for the illegal market, especially for cigarettes and alcoholic drinks. Smuggled, unregulated products, the source says, reach first the places where money is tightest.
VDD Analysis
The government that calls itself the defender of the poor chose, once again, the easiest path: taxing consumption, which weighs most on the pockets of those who earn the least. Instead of cutting spending and trimming the public machine, Brasília will seek R$ 41.9 billion in the cigarettes, beer, cachaça and soda of the worker. And it did so after the election, when voters could no longer answer at the polls. The "sin tax" has a name that sounds moral, but the bill has a clear address: the homes of those who have the least.
