Government calls on 200 people to regulate tax reform

Approved and promulgated at the end of 2023, the consumption tax reform continues to be among the priority issues of the government’s economic team at the beginning of the year. This is because the constitutional amendment that will change the model of taxation of goods and services left 71 points yet to be regulated through complementary law. According to the text, the Executive needs to forward its proposals for detailing the new rules to Congress by mid-June.

On Wednesday (24), the Minister of Finance, Fernando Haddad, began work on a program, made up of around 200 people, who will advise the process within a period of 60 days. A total of 19 technical groups (GTs) were created to prepare the draft laws. According to the ordinance that establishes the structure, each of them will be formed by representatives of the Union, states and municipalities.

In general terms, the reform will replace the current PIS and Cofins with the Contribution on Goods and Services (CBS), and ICMS and ISS will give way to the Tax on Goods and Services (IBS). Together, CBS and IBS will make up a dual Value Added Tax (VAT) system. There will also be a Selective Tax, aimed at discouraging the consumption of products considered harmful to health or the environment.

The working groups of the consumption tax reform regulation advisory program are divided into five main themes:

1 – Regulation and administration of IBS and CBS:

• GT 1 – import and special customs regimes;
• GT 2 – immunities;
• GT 3 – specific financial services regime;
• GT 4 – specific regime for operations with real estate;
• GT 5 – specific fuel and biofuel regime;
• GT 6 – other specific regimes;
• GT 7 – operations with goods and services subject to a reduced rate;
• GT 8 – rebalancing of long-term contracts;
• GT 9 – transition to IBS and CBS, including criteria for setting reference rates and reimbursement of current tax credit balances;
• GT 10 – tax treatment of the Manaus Free Trade Zone and free trade areas;
• GT 11 – coordination of IBS and CBS inspection;
• GT 12 – IBS and CBS administrative litigation;
• GT 13 – basic food basket and refund of IBS and CBS to individuals (cashback);
• GT 14 – IBS and CBS administration operational model;
• GT 15 – coordination of regulation and interpretation of IBS and CBS legislation;

2 – Regulation of the distribution of Goods and Services Tax resources, including during the transition period (GT 16);

3 – Regulation of the Sustainability and Diversification Fund of the State of Amazonas and the Sustainable Development Fund of the States of the Western Amazon and Amapá (GT 17);

4 – Regulation of the IBS Management Committee (GT 18); It is

5 – Selective Tax Regulation (GT 19).

The first 17 technical groups will be formed by two representatives from the Ministry of Finance, two from states and two from municipalities. In the case of subnational entities, nominations will be made by the National Committee of Finance Secretaries (Comsefaz), the National Confederation of Municipalities and the National Front of Mayors.

GT 18 will be made up of four representatives from states and four from municipalities, while GT 19 will have three representatives appointed directly by the Federal Revenue Secretary, Robinson Barreirinhas.

In addition to the technical groups, the technical advisory program also has a systematization committee and a legal analysis group. The entire team will be coordinated by a representative of the Extraordinary Secretariat for Tax Reform, led by economist Bernardo Appy.

Regulation must be divided into three complementary bills

Once completed, the drafts will be forwarded to the Executive, which will formulate the bills to be sent to the Legislature. The Ministry of Finance’s idea is to divide all regulations into three proposals, to be sent to Congress at the beginning of April.

The broadest of the three projects must encompass, in a single text:

• the functioning of specific sectoral regimes;
• the list of products from the national basic basket, which will be exempt from future Value Added Tax (VAT);
• the final design of cashback for the poorest population;
• CBS and IBS regulation.

The second project would address the governance of the IBS Management Committee, while the third would detail the functioning of the Selective Tax. As for the regulation of the Sustainable Development Fund for the States of the Western Amazon and Amapá, it is still undefined whether it will be done through a fourth complementary bill or whether it will be included in one of the other three.

To CNN Brasil, Appy explained that the idea of ​​dividing tax reform regulations into three projects follows a technical analysis, which could still change depending on the government’s political reading. Furthermore, nothing prevents Congress from taking the initiative to appoint the same rapporteur for the three texts, who would unite them into a single substitute. “It’s a decision that’s not up to me,” he said.

On January 2, in an interview with the newspaper “O Globo”, the minister classified the details of the reform as one of the goals for the year 2024. “There is an obligation by law to regulate tax reform, which are 71 matters that can even appear in the same complementary law”, he said.

For Bruno Rodrigues Teixeira, tax lawyer and partner at TozziniFreire Advogados, the biggest challenge will be the complementary legislation relating to IBS, the creation of which results from the biggest changes in relation to the current tax system. Resulting from the merger of ICMS and ISS, the new tax will be managed by states and municipalities, will adopt the principle of taxation at destination and will have unique regulations and administrative litigation.

“This tax requires a complementary law that regulates the rules for distributing revenue, the compensation regime, the term and form of reimbursement of accumulated credits, the criteria for defining the destination of the operation, exemptions (rate reductions) and the fiscal administrative process, among others”, he explains.

In the case of CBS and Selective Tax, regulation through a complementary law will outline the contours of the facts generated and their calculation bases, among other matters.

He recalls that the constitutional amendment for tax reform conceived five new principles, which should guide all regulation of new taxes, under penalty of unconstitutionality: simplicity, transparency, tax justice, cooperation and defense of the environment. “Another point of attention is the determination that changes in tax legislation will seek to mitigate regressive effects”, he highlights.