Almost half of senators’ amendments would increase the VAT rate

Almost half of the amendments presented by senators to modify the text of the proposed amendment to the Constitution (PEC) of the tax reform approved in the Chamber would increase the general rate of the new Value Added Tax (VAT) system to be created.

The conclusion is a survey of the Pra Ser Justo movement, carried out based on the 310 amendments presented in the Senate until last Friday (6). According to the analysis, 46% of the proposals would increase the weight of the Goods and Services Tax (IBS) and the Contribution on Goods and Services (CBS) for the majority of taxpayers by providing for exceptions to benefit certain sectors.

Rapporteur of the matter, Senator Eduardo Braga (MDB-AM) intends to present his opinion to the House’s Constitution and Justice Committee (CCJ) on the 24th and hopes that the vote will be completed in plenary by November 9th.

Also according to the entity’s study, published by the newspapers “Folha de S.Paulo” and “O Estado de S.Paulo”, 66% of the amendments have a negative content because they would harm the functioning of the new tax system. Only 7% (22 suggestions) were considered positive by the movement.

Among those that could improve the text, according to Pra Ser Justo, are those that deal with the assessment of tax benefits and the calculation of impact for the inclusion of new goods at the reduced rate.

Another 27% deal with political issues, such as the design of the Federative Council of states and municipalities, which would be responsible for managing the IBS.

Only one amendment reduces tax benefits and, thus, would contribute to reducing the general tax rate. The suggestion, by Senator Weverton (PDT-MA), sets the reduction in the rate of benefited sectors at 50% (the percentage approved in the Chamber is 60%); excludes from the list of exceptions “goods and services related to national security and sovereignty”, such as weapons and ammunition; and limits the special regime for public transport to public service.

In August, a government study, prepared at the request of parliamentarians, concluded that the standard rate for new consumption taxes that will be created with the tax reform should be between 25.45% and 27%.

A level within this range would be necessary to maintain the current average tax burden, considering the exceptions that will be applied to certain sectors, according to the document, produced by the Extraordinary Secretariat for Tax Reform (Sert) of the Ministry of Finance.

The projected taxation is the sum of the IBS rates, which should replace ICMS and ISS, and CBS, the result of the merger of PIS and Cofins. Together, the new taxes will make up a dual VAT system.

The PEC version of the tax reform approved in the Chamber provides for a rate reduced by 60% for sectors such as health, education, medical devices, public transport, agricultural products, food, personal hygiene products, as well as artistic, cultural, journalistic and audiovisual productions . The precise definition of the list of exceptions, however, will be made by infraconstitutional legislation.

Among the amendments presented by senators, there is a suggestion to further reduce the differentiated rate, increasing the discount from 60% to 80% of the standard rate.

According to the survey, the sectors that appear with the most requests for amendments to different regimes are, respectively: tourism, services (in relation to credit for payroll), electricity, agribusiness, flowers/ornamental plants, cargo transportation, regulated professions (lawyers, doctors, architects) and air transport.

“After this analysis, the gap between the senators’ speeches about reducing the tax burden versus what they are actually proposing as changes to the text of the reform becomes very clear,” said Marina Thiago, co-founder and manager of Pra Ser Justo, to the newspaper “ The State of S.Paulo”.

“Most of the amendments go towards the exact opposite, increasing the tax burden and promoting a reform that reinforces inequalities and injustices both for the population and for competitiveness between sectors”, he added.

There are even parliamentarians who presented amendments to include more sectors in the reduced rate, and at the same time proposals to limit the IBS and CBS rates, positions that are antagonistic to each other, according to the movement.