‘Fathers of tax reform’ defend maintaining incentives for the Manaus Free Trade Zone – 02/28/2023 – What tax is this

The CCIF (Centro de Cidadania Fiscal) will defend the maintenance of tax incentives to the Free Zone of Manaus within the proposal of tax reform of consumption under discussion in Congress, according to the director of the institution, Eurico de Santi.

The original proposal of the entity, which participated in the preparation of the text that is being discussed in the Chamber (PEC 45), was to end the differentiated tax treatment and make compensation through the transfer of resources to the region, but this solution proved to be politically unfeasible.

“The maintenance of the Free Zone is a political requirement for the approval of the reform of consumption taxation. It will be up to a complementary law to regulate the treatment [à região], not applying the prohibition on the granting of tax benefits. The CCIF defends a special treatment for the Free Zone of Manaus.”

During the webinar “Diálogos Amazônicos – tax reform and treatment of the Manaus Free Zone”, held this Monday (27) by FGV, de Santi also said that politically it is easier to approve a dual IVA (a new federal tax and another shared between states and municipalities), but considers that this may lead to some risks of judicialization and a greater complexity of the system.

“It’s a political choice. Our position is technical. What’s best for the taxpayer is a VAT [Imposto sobre Valor Agregado] single.”

He also stated that it will be necessary to give differentiated treatment to some segments, such as real estate development, in addition to keeping the granting of loans from the financial system exempt from the new consumption tax that will replace PIS/Cofins, IPI, ICMS and ISS. He also highlighted the differentiated treatment for government purchases: the Entity that makes the purchase keeps 100% of the tax collected.

Regarding the Free Zone, former federal deputy Luiz Carlos Hauly, who also participated in the debate, stated that the only way to maintain the benefits within the new tax logic will be through the use of presumed credit for established companies —thus, they could deduct the credit of the amount of the tax to be paid. “We are together to defend the Manaus Free Trade Zone. We need the support of the Amazon bench [para aprovar a reforma]”, he stated.

Hauly also highlighted the compensation through funds that will guarantee resources for the region in the coming decades, until Amazonas decides on the best path for its development, with or without maintaining the focus on the industrial pole.

The secretary of Economic Development of Amazonas, Pauderney Avelino, who represented the state in the debate, stated that the tax reform is extremely relevant for the country, but that it is necessary to seek a solution for the region.

He has been talking to representatives of agribusiness and construction, two segments that are also resistant to changes in the face of the possibility of higher taxation.

“We want to vote on a reform that is viable within the National Congress. These sectors have bottlenecks and problems. The Free Zone is not a problem, it is a solution. We want these solutions to be contemplated.”

The political concern with the issue is explained, for example, by the fact that the working group of 12 parliamentarians that discusses the reform has the participation of three representatives from Amazonas.

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