Bernard Appy: change in Income Tax comes out this year – 03/15/2024 – Market

The extraordinary secretary for Tax Reform at the Ministry of Finance, Bernard Appy, stated that the government will present the Income Tax reform proposal this year.

The consumption tax reform enacted in December placed in the Constitution a 90-day deadline for presenting the proposal on income taxation, but there is no punishment if it is sent later.

This Friday, the secretary told the Sheet that the changes in IR are not limited to a proposal. They are part of a process that began with the new taxation rules for closed-end funds and offshore companies, approved in 2023.

“Firstly, the deadline hasn’t expired yet, so you have to wait until the 19th [próxima terça]. Secondly, we do not treat the issue of Income Tax as a silver bullet, a single proposal, but a series of measures that go towards improving income taxation in Brazil, making it fairer and more efficient”, he stated .

“We understand that this is a process. There will certainly be more proposals throughout this year.”

Report from Sheet this Friday (15) showed that the ministry should postpone the sending of the project to modernize the IRPJ (Corporate Income Tax) and the CSLL (Social Contribution on Net Profit), taxes on company profits, until after the elections for October. Taxation of the distribution of profits and dividends from companies to individuals is also expected.

The postponement is part of the strategy of prioritizing the regulation of tax reform on consumption and approving it in Congress before the elections.

Appy stated that the presentation of any new proposal depends on consensus between the technical and political areas of the government.

Regarding the regulation of tax reform on consumption, the secretary said that the idea is to complete the work together with the states and municipalities by the end of March and send the bills in mid-April.

This Friday, the secretary participates in the seminar “Tax Reform: the paths to convergence”, held by Afresp (São Paulo auditors’ association) and the Viva movement, with support from the Inter-American Development Bank and the organization Samambaia.org.

Guilherme Cezar Coelho, founder of Samambaia.Org and Republica.Org, states that Income Tax reform cannot be left behind and that it is important to increase the productivity of Brazilian companies and reduce inequalities.

He cites a study published by Sheet which showed that the effective tax rate on the profits of large Brazilian companies is 18.1%, below that set by law, 34%, and the global average of 23%. The difference is due, for example, to tax benefits and tax planning.

“The companies that are able to pay less are those that are busy with tax planning, spending a fortune, losing their productive focus and lobbying, while the State gives them tax exemptions without metrics”, says Coelho.

During the seminar, Rodrigo Spada, president of Afresp, stated that the approval of the tax reform shows a consensus that everyone loses with the current system. “The taxpayer is the big loser. He does not have the transparency in consumption taxation to know how much he pays and what the return is in public services”, he stated.

For Cristina MacDowell, main specialist in fiscal management at the IDB (Inter-American Development Bank), the next steps of the reform must consider the digital transformation environment that allows the creation of a system different from the current one in this sense as well.

“It is a reform that seeks more social justice, an improvement in the business environment and that will also increase the efficiency of tax administration. We must be careful not to carry out a reform looking in the rear view mirror.”

Nelson Machado, director of CCiF (Center for Fiscal Citizenship), stated that, after focusing on changes in the tax system, it is also necessary to think about a budget reform, which is also based on a system that is increasingly complex, less transparent and less understanding.

“Tax reform is one side of the coin. We have the other side, spending, public policy. Building VAT regulation is fundamental, but it is also essential to launch the challenge of budget reform.”