Government misses deadline and Haddad says that Income Tax reform will be carried out little by little

The Minister of Finance, Fernando Haddad, minimized this Tuesday (19) the failure to meet the constitutional deadline to send the bill to the National Congress proposing the reform of income and payroll taxation. Haddad had already said that the reform, as it is a ‘complex’ matter, would be carried out in parts.

The tax reform, which simplified taxes on consumption, enacted on December 20 last year, established a deadline of 90 days for submission, which ends today (19).

“There is no problem if you fail to send part of the income tax reform within those 90 days. We understand that we can send it as the texts are formatted and discussed with society. There is no point in sending something that I don’t I’ve been talked to before. It’s bad in Congress there,” the minister told journalists.

Haddad said he is sure that Congress will prefer to receive a better project a few weeks later than to receive something to be trimmed. “Instead of helping the country find a path, this gets in the way. In the recent past, several projects like this were sent to one house next to another. In the test, does it end up in someone’s drawer? It becomes a Frankenstein. It’s not worth it” he stated.

In practice, there is no type of punishment if the government does not meet the deadline. But non-compliance was criticized by public accounting experts.

“The lack of ceremony with which the minister deals with non-compliance with the Constitution is quite impressive,” tax expert Luiz Gustavo Bichara told CNN. “Article 18 of PEC 45 (tax reform) makes it clear that the reform is sent expressly within 90 days as a basis for reducing taxes on consumption and payroll.”

Reform will continue throughout the year, says ministry

The Ministry of Finance, assessed in a note, on Monday (18) assessed that the reform “is a process that has already started and will continue throughout the year 2024”.

According to the MF, some proposals related to income and payroll taxation have already been sent to the Legislature, within the deadline proposed by the Constitutional Amendment, including changes in the taxation of offshore companies (investments abroad) and exclusive funds (investment funds for high-income people).

In the case of payroll taxation, the ministry says that the government addressed the issue through a Provisional Measure issued at the end of 2023. The measure reimbursed the payroll of 17 labor-intensive sectors of the economy from April onwards, however, after a strong reaction from society and the opposition, he backed down and presented a bill, which has not yet been considered.

Regarding Income Tax, Haddad argued that the government increased the tax exemption limit through an MP published at the beginning of February, exempting those earning up to two minimum wages, corresponding to R$2,824. Previously, anyone earning up to R$2,640 was exempt – an amount that corresponded to two minimum wages in 2023.