Gol Drops as Brazil Denies Payroll Tax Cut Plan: Sao Paulo Mover

Gol Linhas Aereas Inteligentes SA (GOLL4), Brazil’s second-biggest airline by market share, plunged the most in four months after the government denied a report saying it may cut payroll taxes to help the industry.

Shares fell 7.6 percent to 10.51 reais at the close in Sao Paulo, the most since Dec. 19. It was the worst performer on the benchmark Bovespa index, which gained 0.5 percent.

Gol soared 11 percent yesterday after Valor Economico reported that the government may cut payroll and aircraft fuel taxes to boost competitiveness. The newspaper didn’t say where it got the information.

The Finance Ministry, in an e-mailed statement after the close of trading, denied it is studying a payroll tax cut and didn’t comment on whether it might cut taxes on aircraft fuel. Fuel and payroll expenses accounted for 60.1 percent of Gol’s fourth-quarter costs, according to a March 27 regulatory filing.

“There’s no driver that supports gains in the airline sector,” Banco do Brasil SA (BBAS3) analyst Leonardo Nitta said by phone from Sao Paulo. “The only thing that could benefit Gol would be a cost reduction as the one speculated yesterday, that would reduce the company’s two biggest costs, payroll and fuel.”

In July, Brazil will eliminate the payroll tax for 15 industries, including textiles, auto parts and aircraft manufacturing, Finance Minister Guido Mantega said on April 3. The following day, Trade Minister Fernando Pimentel said the country planned to extend the elimination to all industries by 2014.

In the March 27 filing, Gol said payroll expenses increased 30 percent to 447.6 million reais ($237.9 million) in the fourth quarter. On April 2, the company said it dismissed 131 flight crew and the cut of 80 of its 900 daily flights to reduce costs.

Gol shares fell 16 percent this year, trailing the Bovespa (IBOV)’s 11 percent gain in the same period.

To contact the reporter on this story: Jose Sergio Osse in Sao Paulo at josse1@bloomberg.net

To contact the editor responsible for this story: Helder Marinho at hmarinho@bloomberg.net

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