Congress overturns Lula’s veto and payroll exemption is extended until 2027

Congress overturned, this Thursday (14), President Luiz Inácio Lula da Silva’s (PT) full veto of the bill that extended the payroll tax exemption for 17 sectors of the economy, including industry and services. As a result, these sectors maintain the right to tax reductions until December 2027.

Among the senators, only 13 voted to maintain the veto, while 60 chose to overturn it. In the Chamber, 378 voted to reject the veto and 78 to maintain it. From now on, the project goes to promulgation. Find out how each parliamentarian voted.

The proposal had been approved by the Senate in October, but the PT member decided, last month, to veto the text in its entirety, alleging “unconstitutionality” and “contrary to the public interest”. The measure costs public coffers around R$9.4 billion per year.

Lula’s decision quickly generated a mobilization of parliamentarians to overturn the veto. Government members and Minister Fernando Haddad (Finance) still tried to articulate the maintenance of the veto with the promise of a new proposal that would meet the concerns of parliamentarians and the affected sectors, but the movement was unsuccessful.

Shortly before the vote on the veto, senator Randolfe Rodrigues (no party-AP), leader of the government in Congress, said that the overturn was “a recorded defeat”. “It’s something that is in the account, we are aware of it, we know what the position is. My role as leader in Congress is to sustain presidential vetoes, and I will do so knowing that there is an opposing majority.”

The president of the National Congress, senator Rodrigo Pacheco (PSD-MG), also defended the overturn of the vetoes. “[A desoneração] It is a policy that guarantees high employability. We are in a scenario of combating unemployment. In my opinion, I consider the extension of the exemption to be appropriate,” he said.

He also signaled that it is necessary to allow payroll tax relief to continue in Brazil and for it to be improved, potentially extending to other levels of the economy. “Eventual changes may occur within the predictable scenario that already exists”, added Pacheco.

When forwarding the vote to PT deputies, deputy Bohn Gass (PT-RS) said that the exemption will leave the money in the hands of the company, without creating new jobs. “The exemption is the company appropriating money that would go to the State. The State would help with education and health. […] So, the parliamentarians who are voting for the exemption are voting for the company to keep the money”, said the government deputy.

Senator Flavio Bolsonaro (PL-RJ), leader of the opposition in Congress, criticized the PT’s position on the tax exemption veto. “There are countries in the world that are dictatorships and that, in order to reaffirm themselves, they need to put a cute name on their official name. North Korea is the Democratic People’s Republic of Korea. Here, the Workers’ Party vetoes a project precisely to save jobs, to generate jobs and income”, said the senator.

Parliamentary fronts mobilized against Lula’s veto

Eleven parliamentary fronts, such as Commerce and Services, Entrepreneurship, and Civil Construction, launched a campaign to overturn Lula’s veto.

The manifesto says that the exemption “has been fundamental for maintaining and generating jobs in key sectors of the economy, that maintaining jobs and stimulating economic activity also generates revenue through consumption and the collection of other taxes” and that “Overturning the veto is the best way to provide security and guarantee jobs.”

The president of the Entrepreneurship Front, Joaquim Passarinho (PL-PA), stated that the veto “harms employment in Brazil”. According to the deputy, the issue was discussed in Congress for months and the government never saw any problems with the text, until it completely vetoed the approved project, promising that the Treasury would take charge of a new proposal.

Which sectors will benefit from the veto being overturned?

The project, which should now become law, was proposed by senator Efraim Filho (União-PB), and extends for another four years the permission for companies to pay rates of 1% to 4.5% on gross revenue instead of 20 % of the payroll as employer social security contribution.

The measure benefits sectors that are among the most employing in the country:

• clothing and clothing;
• footwear;
• construction;
• call center;
• communication;
• construction companies and infrastructure works;
• leather;
• manufacturing of vehicles and bodies;
• machines and equipment;
• animal protein;
• textile;
• information technology (IT);
• communication technology (ICT);
• integrated circuit design;
• metro rail passenger transport;
• public road transport; It is
• road freight transport.

A People’s Gazetteas a communication vehicle, also benefits from the veto being overturned.

Furthermore, the rapporteur of the proposal, senator Ângelo Coronel (PSD-BA), added an article that reduces the social security contribution from the payroll of municipalities with a population of less than 142.6 thousand inhabitants from 20% to 8%. This reduction in the rates that city halls pay to the INSS (National Social Security Institute) would drain another R$9 billion from public coffers.