Farm is attentive to exceptions in the Tax Reform – 07/12/2023 – Market

After the Tax Reform was approved in the Chamber with exceptions inserted in the text at the last minute, the Ministry of Finance mapped points of attention for the debates in the Senate, mainly related to favored sectors with lower taxation and the distribution of funds from the new tax, which may lengthen the procedure, two government sources told Reuters.

Among the points mentioned are different regimes for the transport, tourism and sports sectors, in addition to exemptions for the basic food basket. In the distribution of resources, a broad discussion is expected on the criteria of the Regional Development Fund and also on the structure of the Federative Council.

As the two legislative houses have different correlations of strength, agreements made by deputies to approve the text may not necessarily reflect the interests of the Senate. While in the Chamber each federative entity is represented by a number of deputies that proportionally reflects its population, the Senate has three parliamentarians per state.

In the Chamber, the Southeast has greater voting power because it is more populous. In the Senate, this differential disappears and, at the same time, smaller states such as those in the Northeast end up with increased power when grouped together, as they are more numerous.

“I believe that the Senate will address federative issues, such as the criterion for sharing the Regional Development Fund, governance of the Federative Council and perhaps the transition in the distribution of the collection to the entities of the federation”, said one of the authorities who closely follow the remodeling.

After pressure from the governors of the Southeast, the text of the Chamber defined that the decisions of the Federative Council, responsible for managing the resources of the new Tax on Goods and Services (IBS) and formed by representatives of the States and municipalities, will be approved taking into account the majority number of states’ votes and also the population factor, which reduced the power of the Northeast.

Regarding the Regional Development Fund and the resources raised with the new tax, the text approved by the Chamber says that the criteria for distributing these funds will be defined later in a supplementary law. In an interview with the newspaper O Globo this Wednesday, the rapporteur for the text in the Senate, Eduardo Braga (MDB-AM), indicated that he intends to include part of these criteria in the Constitution.

Shortly before the vote on the text of the reform in the plenary of the Chamber, the exceptions to specific sectors were expanded. There was also a reduction in the rate for favored schemes, which went from 50% of the full charge to 40%.

“It greatly expanded the transport sector”, cited the second source as one of the points of concern. “Practically, only air transport was left out, but not regional transport”.

The text defined a 40% rate for collective road, rail and water transport, of an urban, intercity and interstate nature, in addition to providing for a special regime for hotel services, amusement parks, restaurants and regional aviation.

The proposal also benefits the agricultural sector, cultural productions and sports activities from the rate reduction.

In the case of religious institutions, the project extended the tax exemption, currently in effect for “temples of any cult”, to “religious entities, temples of any cult, including their charitable and charitable organizations”.

On another front, the text creates a national basic basket. Initially, the proposal establishes that the rate will be zeroed only for horticultural products, with the charge of 40% of the rate for the rest of food items.

However, the source pointed out that the text defines that a complementary law could expand the scope of exempt food. Today, tax benefits for the basic food basket are criticized for including items considered luxury or that are not part of the diet of poorer families.

According to one of the sources, the ideal is that the list of exceptions is not expanded in the Senate, which could demand an increase in the general rate for all sectors as a form of compensation – a concern voiced publicly this Wednesday (11) by the minister of Planning, Simone Tebet.

PACHECO MEETS WITH RAPPORTEURS OF THE REFORM

The president of the Senate, Rodrigo Pacheco (PSD-MG), met this Wednesday with the rapporteurs of the tax reform in the Senate, Eduardo Braga (MDB-AM), and of the Chamber, Aguinaldo Ribeiro (PP-PB), in seeking to sew an “alignment” in the discussions of the proposal.

“The meeting was an opportunity for us to deepen the discussion on the subject and for deputy Aguinaldo Ribeiro to present some points of the text to the rapporteur of the matter in the Senate”, said Pacheco, on Twitter.

“This alignment will certainly contribute for the reform to advance in Congress and for Brazil to have, as soon as possible, a simplified and modern tax model”, he added.

In a press conference the day before, Braga said he was against slicing the proposal and that he sought to build a consensus text in the Senate so that, should he return to the Chamber, he would have support.

The Senate rapporteur has already spoken of “revisiting” points approved by the House. His expectation is to try to vote on the proposal in the Senate by October and that it be enacted by December.