fight for special aliquot is now in the Senate

Relief and optimism took over the bar and restaurant sector after the approval of the Constitutional Amendment Proposal (PEC) that deals with tax reform, in early July, by the Chamber of Deputies. The inclusion of companies in the sector in the list of activities that may have a different rate, to be established in a complementary law in 2024, was seen by the sector as a victory and an act of recognition. Now, the fight continues in the Senate, where the text should be analyzed in the second half of 2023. The expectation is that the Tax Reform will be enacted later this year.

“The bar and restaurant sector was awarded a special rate by the Chamber for being recognized as an essential sector, both from a social and economic point of view. We are one of the biggest employers in the country and today we have ⅓ of everything that Brazilians spend away from home, considering that many of these Brazilians don’t even have a kitchen. So, it is a fundamental sector”, analyzes Paulo Solmucci, executive president of the Brazilian Association of Bars and Restaurants (Abrasel).

Result of a strong articulation with members of the tax reform working group and representatives of the federal government, the prediction of a special rate for the away-from-home food sector is now awaiting approval by the Federal Senate. Last week, Senator Eduardo Braga (MDB-AM) was announced as the rapporteur for the proposal at the House Constitution and Justice Committee (CCJ). Afterwards, the matter goes to vote in the Plenary – which should happen in November 2023.

One of the industry’s main arguments for claiming it is the differentiated taxation regime already applied in other countries. “We hope that the Senate can have the same understanding and keep the sector among those that will have a differentiated rate, as is the case in the whole world, especially in Europe, where the bar and restaurant sector has a special rate, around 40% about the full rate”, explains Solmucci.

According to the text approved by the parliamentarians, a complementary law will create the Tax on Goods and Services (IBS) – to encompass ICMS and ISS – and the Contribution on Goods and Services (CBS) to replace the PIS, the PIS-Importation, Cofins and Cofins-Importation. The full rate has not yet been defined and will be regulated after studies by the Federal Revenue Service, but the sector expects it to remain below the initial forecasts of 25%.

“The published rate of 25% seems high to us. But now what needs to be analyzed and what we are discussing in the Senate and in the Chamber, is what the exceptions will be and how this collection base will expand”, explains the president of Abrasel, citing digital sports betting and services that originate outside of Brazil as examples of sectors that, with the tax reform, will start to contribute. “So, our expectation is that the rate may not be so high, mainly due to the reduction in tax evasion and the expansion of the base”, he explains.

The sector’s satisfaction with the text of the tax reform, although adjustments still need to be made, is accompanied by concern about possible pressure on services and some inputs, which could result in higher prices. Among the changes foreseen by the new law is the creation of a selective tax (IS) on the production, sale or importation of products harmful to health or the environment. Alcoholic beverages and foods loaded with sugar and fat should be included in this list.

“So that these prices are not taken to the consumer at first, it is very important that we can have a great productivity that offsets the additional costs”, says Solmucci.

Calibrating the tax reform in order to promote the maximum well-being of the population with the lowest cost in the short term would be ideal and the president of Abrasel says that the sector believes it is possible. “We are optimistic. The transition from the current model to the future takes ten years, so yes, there is a possibility. The reform eliminates the tax war, simplifies the issue of taxes, gives transparency to society and with all that it can, in fact, , promote relevant productivity gains, which in the end will benefit everyone”, he concludes.