Alckmin: Tax reform may pass in the 1st half – 02/06/2023 – Market

Alckmin: Tax reform may pass in the 1st half – 02/06/2023 – Market


The vice-president and minister of Development, Industry, Commerce and Services, Geraldo Alckmin, said this Monday (6) that the tax reform could be approved in the first half of this year.

Alckmin cited PECs (proposed amendment to the Constitution) 110 and 45, under discussion in the National Congress, which aim to simplify the tax system in Brazil.

“I believe that [a reforma] may be approved in this first semester. You have to take advantage of the beginning of the government to approve the PECs, which requires a change in the Constitution and a qualified majority”, said Alckmin during a forum on the green economy held by BandNews TV, in São Paulo

The vice-president also mentioned the election of Arthur Lira (PP-AL) and Rodrigo Pacheco (PSD-MG) to head the two legislative houses, which could help speed up the process.

“Both presidents-elect, in the House and Senate, [são] favorable to the tax reform, which is a reform that can make a difference, bringing economic efficiency, simplifying, helping investment in Brazil”, he said.

According to him, the reform is fundamental for the development of the Brazilian economy and may, in 15 years, bring a gain of 10% in GDP growth (Gross Domestic Product), by simplifying and reducing costs in the payment of taxes.

The speech is similar to that of Minister Fernando Haddad (Finance), who has been saying that the tax reform could be voted on in the first half of the year, with the possibility of approval in the Chamber of Deputies by April.

The Minister of Planning, Simone Tebet, stated last week that the discussion of the issue in Congress will take at least six months.

Alckmin also defended this second measure to reduce bureaucracy. “Here everything is mandatory, everything is a rule,” he said. “We need to get rid of this cartorial culture. Simplify, digitize, make life easier for people and companies.”

Alckmin echoes Lula in criticism of the interest rate level

During the meeting, Alckmin also spoke about the need to offer a cheaper cost of capital.

He echoed President Luiz Inácio Lula da Silva (PT) in his criticism of the Central Bank, questioning why interest rates are at such a high level. “Is it a tax wedge? So let’s remove the financial transaction tax. Is it a lack of competition? The US has 2,000 banks [por exemplo], so let’s increase the competition. Is it economic insecurity? Let’s improve macroeconomics, economic assumptions. Is it political insecurity? We are going to improve the political environment”, he listed.

When talking about monetary policy, however, Alckmin was more restrained than Lula, who called the current Selic rate “a disgrace”.

The discussion on interest rates has been the keynote of Lula’s statements in the economic area. The president criticizes the current level of the rate — at 13.75% per year — and its effects on the economy, by making credit more expensive and cooling consumption.

The petista has also been increasing the tone of criticism of the BC’s actions, sometimes questioning the body’s autonomy and suggesting that the rule can be changed.

Last week, he referred to the head of the autarchy, Roberto Campos Neto, as “this citizen” and said that he will wait for the end of the BC’s term (which runs until the end of 2024) to assess the institution’s independence.

Lula’s criticisms of the BC’s management, however, have increased inflation expectations and pressured interest rates, generating an effect contrary to that intended by the government.

During this Monday’s event, Alckmin stressed the need for a lower cost of capital for the competitiveness agenda, without mentioning the Central Bank.

In addition, the vice president also spoke about the importance of moving forward with international agreements.

“You have to work with international agreements. Not only with the European Union, but with other countries. Brazil has 2% of the world economy, [ou seja] 98% of the economy is outside Brazil. So, we have to have insertion in the international economy, in the big global chains”, he said.

The vice president mentioned the recent US decision to remove Brazil from the list of countries that are subject to export barriers. [antidumping] applied to steel. Without charging a fee, he said that Brazil should increase the sale of carbon steel plates to the country.

MOST ADVANCED PROPOSALS AT THE CONGRESS

1) PEC 45 – report by Deputy Aguinaldo Ribeiro

  • Replaces five taxes (PIS, Cofins, IPI, ICMS and ISS) with a Tax on Goods and Services and a Selective Tax on cigarettes and alcoholic beverages
  • Six-year transition in two phases, one federal and the other with ICMS and ISS
  • Replaces the exemption of the basic food basket with the refund of taxes for lower-income families

2) PEC 110 – Senator Roberto Rocha report

  • Creation of CBS (Contribution on Goods and Services) with merger of PIS and Cofins
  • Creation of the IBS (Tax on Goods and Services), with the merger of ICMS and ISS
  • Replaces IPI with a selective tax on items harmful to health and the environment
  • Creation of the Regional Development Fund, supplied with IBS resources
  • Tax refunds for low-income families

3) PL 3887/2020 – proposal from the Ministry of Economy

  • Creation of CBS (Contribution on Goods and Services) with merger of PIS and Cofins
  • Current rule for exemption from the basic food basket maintained

4) PL 2337/2021 – text approved by the Chamber

  • IRPF exemption in the range up to R$ 2,500 and average correction of 13% in the other ranges
  • Maximum simplified discount of BRL 10,563.60 (today, the limit is BRL 16,754.34)
  • Taxation of dividends, with exemption for Simple and presumed profit
  • Cut the IRPJ base rate from 15% to 8%
  • CSLL cut by up to 1 percentage point
  • End of JCP (Interest on Equity)

Sources: Chamber of Deputies and Federal Senate



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