Congress must overturn veto on exemption – 11/25/2023 – Market

Leaders of the National Congress claim that Minister Fernando Haddad’s (Finance) promise to create an alternative to payroll tax relief should not prevent the Legislature from overturning President Lula’s (PT) total veto of the law.

Deputies and senators state with reservation that the Ministry of Finance has ignored negotiations made by the government itself during the processing of the proposals. They cite the cases of Carf (Tax Resources Administration Council) and Marco das Guarantees.

Parliamentarians also claim that the minister could have presented a plan B until last month, when the Senate postponed the approval of the bill by the CAE (Economic Affairs Committee) by a week.

They also complain about the low level of commitment to some amendments, which leaves deputies and senators exposed to criticism from mayors for unfulfilled delivery promises, just a few months before the 2024 municipal elections.

Lula’s total veto of the exemption project was anticipated by the SA Panel, from Sheet, this Thursday (23). This Friday morning (24), Haddad stated that the government will present a proposal by the end of the year to replace the payroll tax exemption.

According to him, the measures to consider the end of the exemption will be sent after COP 28, when the vote on the Tax Reform should have already taken place.

To save time until the approval of the Tax Reform, the government considered asking for the text to also be voted on by the Senate plenary. The idea ended up being discarded, however, due to the risk of a double defeat.

Deputies and senators say that the government would only have been successful if it had only vetoed aid to city halls that do not have their own pension schemes — also provided for in the bill.

Rapporteur of the proposal in the Senate, Ângelo Coronel (PSD-BA) states that the minister’s intention to eliminate the deficit in public accounts next year is “laudable”, but says that this cannot be done “by sacrificing those who pay taxes”.

“It may be that when the COP returns [reunião climática da ONU, que acontece nas primeiras duas semanas de dezembro], the government sends a project similar to the one that has already been approved. And then he can be sure that it will be well absorbed by the market and city halls. If it’s something different, I have no doubt it won’t be welcome,” he said ironically.

“And regarding the issue of city halls, the biggest creditor of city halls is the Union. If you don’t arrive now, lend a hand and relieve the city halls, they will all become unviable. The vast majority are bankrupt. So let’s work to overturn the veto. “

Even after the Finance Minister’s statement, the author of the project and leader of União Brasil, senator Efraim Filho (PB), followed the same line. Efraim said that Congress will try to overturn the veto by the end of the year.

“We will strive to reverse this decision and overturn the veto later this year, as the project was approved with solid support and a broad majority in both Houses,” he declared in a statement.

Senators and deputies do not even rule out trying to overturn the exemption veto in the next session of Congress, initially scheduled for next Tuesday (28). The session, however, has already been postponed several times due to lack of agreement.

There are those who say they prefer to wait until next year for this, so as not to have another clash with the government in 2023, since the veto on exemption, specifically, does not lock the plenary agenda — and, therefore, does not prevent other topics be voted on first.

The full veto represents an important victory for Haddad, who managed to convince the Planalto’s political wing to deny the renewal of incentives for 17 sectors of the economy.

According to people who participated in the last meeting on the topic at the Palace, President Lula was convinced by Haddad’s arguments in defense of the Union’s cash flow and the fulfillment of next year’s fiscal targets.

Per year, the exemption implies a reduction of R$9.4 billion in federal revenue. Since it was created in 2012, the measure has already represented the suppression of around R$140 billion in revenue.

However, parliamentarians claim that the positive effect on the economy exceeds R$10 billion, which would come from the taxation of an increase in company revenue. The account also considers an increase of more than 620 thousand jobs in the sectors covered, according to them.