Congress approves R$15 billion to compensate for losses of states and municipalities

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Original text, presented in October by the Executive Branch, only provided for the release of resources for ministries

Brasilia DF) – The National Congress approved this Thursday (9) bill (PLN) 40/2023, which releases R$15 billion to compensate for the loss of revenue from states, the Federal District and municipalities. The text also opens a special credit of R$207.4 million to pay expenses for eight ministries.

The original text, presented in October by the Executive Branch, only provided for the release of resources for ministries. Two weeks later, the Presidency of the Republic sent a new message to include the R$15 billion allocated to states, the Federal District and municipalities.

Of this total, R$8.7 billion will cover losses in revenue from Tax on Operations related to the Circulation of Goods and on Provisions of Interstate and Intermunicipal Transport and Communication Services (ICMS). The remaining R$6.3 billion compensates for the reduction in transfers to the Participation Funds of the States and the Federal District (FPE) and Municipalities (FPM) in 2023.

The transfer to compensate for ICMS losses is provided for in Complementary Law 201, of 2023, sanctioned in October. According to the text, the Union must transfer a total of R$27 billion to states and the Federal District by 2025.

The Ministry of Planning and Budget (MPO) decided to bring forward the transfer of part of the resources to this year, which should only begin in 2024. This was possible because, according to the MPO, there is a fiscal space of R$74.9 billion in in relation to the primary result target established in the Budget Guidelines Law.

‘Crucial project’

The R$15 billion released this year must be distributed proportionally to each entity’s loss of revenue. The reduction in revenue was caused by Complementary Law 194, of 2022. The rule limited the ICMS rate charged on fuel and other products considered essential to 17% or 18%.

The president of the Mixed Budget Committee (CMO), senator Daniella Ribeiro (PSD-PB), classified PLN 40/2023 as “a crucial project”.

“It is a fundamental moment for the country. This measure is vital to ensure that states and municipalities can continue to provide essential services to the population, even in times of economic adversity”,

he stated.

For senator Zenaide Maia (PSD-RN) compensation is a matter of justice.

“This is a guarantee of resources for states and municipalities. The situation is not simple. If this recovery from the federal government is not achieved, most Brazilian municipalities will not be able to meet their commitments, including payment costs. In the case of ICMS, 25% goes to city halls. Do you know what it’s like to go to a manager and say: “from next month you no longer have 25% of your resources”? The Brazilian State owes this to education, health and social assistance in municipalities”,

he said.

With regard to constitutional funds, the objective of PLN 40/2023 is to minimize the financial impact verified in 2023. In the case of the FPM, the Union must transfer to city halls the difference between the amounts credited in 2023 and 2022 in the period from July to September, with financial correction. For the FPE, the amount corresponds to the difference between the amounts credited in 2023 and 2022 in the months of July and August, without monetary update.

Opposition parliamentarians also defended the approval of the matter. The leader of the bloc in the Senate, senator Rogerio Marinho (PL-RN), criticized the fiscal policy adopted by the federal government, but said that the compensation project for states and municipalities “is unanimous”.

“Municipalities suffer from the drop in taxes transferred on a mandatory basis, notably FPE and FPM. PLN 40/2023 means that states and municipalities can have some relief in their accounts. The project is unanimous. All parliamentarians, regardless of political spectrum, vote in favor. Those who will benefit from this are Brazilian municipalities”,

he stated.

*With information from Agência Senado

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