Government releases parliamentary amendments to approve tax reform

Just this Tuesday (4), the government of President Luiz Inácio Lula da Silva (PT) committed approximately R$ 2.1 billion in parliamentary amendments, according to data from Siga Brasil, the Senate portal on the Union Budget – an amount record. The strategy repeats the release of funds recorded in May, of R$ 1.7 billion in just one day, when Congress was in the process of approving a series of provisional measures of interest to the government.

The release of funds takes place in a week in which the government seeks to approve a daring economic agenda in the Chamber of Deputies: tax reform, the bill for the casting vote by the Tax Resources Administration Council (CARF) and the conclusion of the new fiscal framework. The discussion of the Proposed Amendment to the Constitution (PEC) of the tax reform (45/2019) started this Wednesday (5) and the vote is scheduled for tomorrow (6), however, there is still a lot of resistance and external pressure against the project .

After tough defeats in the House, caused by the scarce support base, the Planalto needs, once again, to overcome impasses with adjustments negotiated by the mayor, Arthur Lira (PP-AL), and with the allocation of funds. Both Lira and Lula seek in these onslaughts the biggest bets of their mandates, as they see in the approved projects not only emblematic achievements, but also the conditions to make political projects viable.

Most of the BRL 2.1 billion released at the beginning of July took place through state bench amendments, which added up to BRL 1.4 billion. Individual amendments totaled R$719 million.

Resources will be distributed via ten ministries: Health, Defense, Labor and Employment, Social Development, Education, Culture, Agriculture, Agrarian Development, Ports and Airports and Transport. Adding up all the parliamentary amendments already committed by the government in 2023, the amount reaches R$9.7 billion, of which R$7.27 billion are committed to individual amendments by parliamentarians.

With the end of the secret budget (RP9), as the rapporteur’s amendments were known, part of the resources was allocated to the individual amendments of parliamentarians, while the rest was the responsibility of the Executive, informally agreed to be distributed to parliamentarians through ministerial portfolios (RP2).

Amidst the moves, Lira took the opportunity to also collect payment for amendments from previous years. There are around R$9 billion left of the R$9.9 billion that Lula inherited after the end of the secret budget – around R$500 million of this amount was released over the weekend. Planalto has used this amount in retail, to try to attract deputies to expand its support base in the Chamber, but without great success.

In interviews, however, the president of the Chamber did not admit that the release of the amendments collaborated with the progress of the agendas and with the guarantee of a quorum in the votes, considering the recurring complaints of delay in the release of these funds.

Meeting between Lira and ministers dealt with the release of resources

In a meeting held on Monday (3), Lira asked ministers Rui Costa (Casa Civil) and Alexandre Padilha (Institutional Relations), in addition to the leader of the government in the Chamber, José Guimarães (PT-CE), to accelerate the release of resources in view of the urgency of approving the economic matters before the parliamentary recess, starting next week.

The idea was to make a concerted effort and guide each project as consensus was reached. In the final stretch of the tax reform negotiations, the federative issue gained relevance, with the commitment of governors and mayors to promote changes.

The performance of the bench of 99 PL deputies also weighed in trying to postpone the vote on PEC 45/2019 to August, with the public support of former president Jair Bolsonaro (PL). Lira and allies fought resistance.

“Brazil needs new tax legislation. Without it, the country does not advance. It is essential that we prioritize dialogue and be open to suggestions. We should not allow the tax reform to become a party-political battle, nor should we use it as an opportunity to gain momentary notoriety”, said Arthur Lira this Wednesday (5). “We must remember that Brazil is bigger than all of us”, he stressed.

With the aim of obtaining more than the 308 favorable votes needed from deputies to approve the tax reform PEC, the government has the special commitment of the president of the Chamber in partnership with the rapporteur Aguinaldo Ribeiro (PP-PB).

Meanwhile, representatives of the productive sectors, state governments and city halls make their way to Brasília, holding final discussions. “All it took was presenting the text of the reform for an “atomic bomb” to explode. There are several crossed and contradictory interests, in addition to a mathematically insoluble addiction: everyone wants to earn more and does not want to increase taxes”, commented deputy Arthur Maia (União Brasil-BA).

The federative issue gains more weight in the final stretch of the reform

The governor of São Paulo, Tarcísio de Freitas (Republicans), entered the scene at the last minute to defend, together with other governors of the South and Southeast, changes in the tax reform. They managed to include demands, especially in the Federative Council, responsible for centralizing and distributing the collection of the new unified tax on consumption. Tarcísio said after a meeting this Wednesday morning (4) with the Minister of Finance, Fernando Haddad, that he agrees with 95% of the proposal, but negotiated disagreements with the government and the rapporteur for the PEC.

The governor of Goiás, Ronaldo Caiado (União Brasil), leads, in turn, the resistance of the exporting states, who fear loss of income with the change in collection from origin to destination. “The way it is in the text, the governors will lose autonomy and will be in search of allowances”, protested Caiado. The mayor of São Paulo, Ricardo Nunes (MDB), candidate for re-election, heads the criticism of large cities, which fear losing revenue to smaller ones.

Agribusiness, along with other sectors fearful of the percentages that will be charged from each, also acted to demand changes in the PEC.

Faced with opposition from states and economic segments, the Minister of Finance, Fernando Haddad, opened himself up to conversations with the states and focused on the new fiscal framework, leaving the tax reform in the hands of Congress, in order to prevent the PEC from was contaminated by the persistent political struggle between Lula and Bolsonaro. “We want to overcome the minimum number of favorable votes, to show, as in the fiscal mark, that it is a country project”, he defended.

In the PEC under discussion, the new Value Added Tax (IVA), to add taxes on consumption, would absorb the Tax on Industrialized Products (IPI), the Social Integration Program (PIS), the Contribution for the Financing of Social Security (Cofins), the Tax on Transactions relating to the Circulation of Goods and on the Provision of Services (ICMS8) and the Tax on Services (ISS). The question is in the way of distributing the VAT collected among the entities of the federation.

The government’s biggest concern is the need for revenue

The government’s priority focus on the Carf bill is due to the issue of revenue, as there are calculations by the Ministry of Finance that indicate R$ 70 billion more in federal cash if the measure is approved.

Haddad and the Minister of Institutional Relations, Alexandre Padilha, warn that the project would have to be voted on earlier because it is a constitutional urgency, which could block the agenda of the Chamber after 45 days of publication. Lira, however, prioritized tax reform.

As for the new fiscal framework, the text approved by the Chamber and modified by the Senate is ready to be voted on again by the deputies. The question under debate is whether the relaxations made by senators will be maintained, excluding Fundeb and the Federal District’s constitutional fund from the fiscal framework, in addition to allowing the government to spend an additional R$ 40 billion in 2024.