End of aid for events causes new clash between Haddad and Congress

In yet another chapter of the impasse between the Executive, Congress and representatives of the private sector, a program created to help the events sector came into the sights of the Minister of Finance, Fernando Haddad. This is Perse, the Emergency Program for the Resumption of the Events Sector, established in 2022 to mitigate the economic impacts of the Covid-19 pandemic on companies in the sector.

Last year, the total number of waivers from the program reached R$17 billion, according to the minister, which raised an alarm among the economic team, which seeks to bring the primary deficit to zero in 2024.

On December 28, the government established the gradual end of Perse until 2025, in the controversial provisional measure (MP) that also provides for the gradual reinstatement of payroll in sectors that have a discount on the employer’s social security contribution. The original text provided for the aid to the events sector to be valid until February 2027.

For the government, in addition to Perse costing much more than initially estimated – the expectation was an annual waiver of R$4 billion – there were signs of irregularities in the use of benefits. To Congress leaders, Haddad said that the initiative even opened space for money laundering operations involving illicit activities.

“There are indications that this [irregularidades] it happened. Companies that used CNAE [Classificação Nacional de Atividades Econômicas]for example, to pretend to be from the events sector, and they were not from the events sector”, said the minister on Wednesday night (7).

Last year, the IRS detected a construction material company that had declared revenues of R$1 billion under Perse, in addition to gas stations benefiting from the program, as revealed by the newspaper “Economic value”.

Law 14,148/2021, which established the program, considers the following activities to belong to the tourism sector and, therefore, beneficiaries of relief measures:

• holding or marketing congresses, fairs, sporting, social, promotional or cultural events, business fairs, shows, parties, festivals, symposiums or shows in general, event houses, social and children’s buffets, nightclubs and concert halls;
• hospitality in general;
• administration of cinema exhibition halls; It is
• provision of tourist services.

In addition to zeroing the PIS/Pasep, Cofins, CSLL and IRPJ rates for five years, the program allows the renegotiation of debts registered until October 31, 2022, with discounts of up to 70% and installments in up to 145 months, just over 12 years.

The law also authorizes compensation, in an amount equivalent to the expense of paying employees during the pandemic, for companies with a reduction of more than 50% in revenue between 2019 and 2020.

Haddad said he ordered a report from the IRS with the amount of taxes that each company failed to collect as a beneficiary of the program. The document will be sent to Congress. “What we want, at the end of the day, is what? It’s transparency in the data, so Congress can make a well-informed decision about what’s happening,” he said.

“This is not a witch hunt. Obviously, whoever made a mistake will be punished in accordance with the law. But it is about showing that the program cannot have this dimension”, said the minister. “This is very bad for the country, and the country is not in a position to waste this money, given the situation that inspires care in the right direction, to balance the accounts, so that interest rates fall and everyone can develop their businesses, their jobs, generating employment for the entire society.”

In an interview with the program Roda Vivafrom the TV Culturaat the end of January, the minister cited an agreement that would have been made with the president of the Chamber, Arthur Lira (PP-AL), and deputy Felipe Carreras (PSB-PE), author of the bill that established the program, still in December 2022, in relation to amounts that would be allocated to Perse.

According to Haddad, a total of R$20 billion had been defined to help the events sector, regardless of the duration of the program. Gabriel Galípolo, current director of the Central Bank, Robinson Barreirinhas, current secretary of the Federal Revenue Service, and deputy Felipe Carreras also participated in the conversation in which the matter was discussed.

“We said: there is R$20 billion for Perse. It could end in a year, in two, in four, in five, but it will end when it consumes R$20 billion. And it consumed almost R$17 billion last year. Therefore, the MP was necessary because, if you count the ninety of social contributions, and the annual Income Tax, you have exhausted the R$20 billion”, he said.

Given the lack of control over tax benefits granted to certain sectors, including those in Perse, the government sent a proposal to Congress that requires companies to submit an electronic declaration listing all the benefits they enjoy.

“We will have broader control of Perse. It is worrying, it always has been and is in our focus”, said the Secretary of the Federal Revenue, Robinson Barreirinhas, at a press conference last week.

Entities in the sector, parliamentarians linked to the sector and Lira himself, however, have already publicly spoken out against the government’s measure of bringing forward the end of Perse.

About Haddad’s speech in Roda Viva, the president of the Chamber said, back in January, that the agreement with Congress provided for R$25 billion for the program. On Monday (5), at the opening of the legislative year in Congress, Lira criticized the government’s decision to end the program through MP.

“Achievements such as tax relief and Perse, essential for millions of jobs in a sector devastated by the pandemic to be sustained, cannot be reversed without extensive discussion with this Parliament”, he declared.

A meeting between Lira and Haddad that was scheduled for the following day ended up cancelled, suggesting an increase in tension between the government and the Chamber after the speech by the president of the Legislative House. The minister, however, denied any conflict.

On Tuesday (6), the National Confederation of Commerce in Goods, Services and Tourism (CNC) released its own study that suggests that, if Perse is closed, up to R$244 billion per year would no longer be injected into the country’s economy.

According to the entity, before the pandemic, the tourism sector grew at a rate close to 6% per year. After the institution of Perse, the percentage would have jumped to 30%. The study also says that, for every 1% increase in the value added by the tourism sector to the economy in general, there is a 0.9% increase in the Gross Domestic Product (GDP).

“Tourism can be a game changer in improving the living conditions of an entire region, and the right answer is definitely not to reduce investments”, said the president of the CNC, José Roberto Tadros.

To the newspaper “Folha de S.Paulo”, deputy Felipe Carreras said he was convinced that no sector or entity was “doing anything wrong”.

“But, if there are companies, let them be punished very rigorously. But you can’t end the program,” he said. He also said that “he has never seen in any sector everything they are doing to tarnish Perse”. “Why this prejudice towards the Brazilian artistic class, towards the hotel industry, towards those who produce events?”, he asked.