Government seeks support from agribusiness for approval of Tax Reform

The Ministry of Finance mapped resistance to the approval of the first stage of the tax reform, proposed by Congress, and identified the agribusiness sector as the main opposition to changes in taxes on goods and services. This resistance, according to the ministry, would be even greater than that made by the service sector, which has been leading a front against the approval of the reform in Congress and defending the thesis of creating a new CPMF (Provisional Contribution on Financial Transactions).

The team is betting on “transparent dialogue” and informative materials to debunk “myths” that the Lula government considers have been built in recent years, which prevent the creation of the Value Added Tax (VAT).

The Minister of Economy, Fernando Haddad, has already spoken with the Chief Minister of the Communication Secretariat (Secom) of the Presidency of the Republic, Paulo Pimenta, to fine-tune the communication of the tax reform, which he sees as central to his economic policy strategy for the growth.

According to Deputy Arnaldo Jardim (Cidadania-SP), director of the Agribusiness Parliamentary Front – and who will be the institution’s vice-president -, the sector has actively participated in Congress in debates around tax reform, both the Proposed Amendment to the Constitution (PEC) 110 and 45. The first creates the CBS (Contribution on Goods and Services), joining PIS and Cofins, and the IBS (Tax on Goods and Services), joining ICMS and ISS. 45 replaces five taxes (PIS, Cofins, IPI, ICMS and ISS) with a Tax on Goods and Services and a Selective Tax on cigarettes and alcoholic beverages.

“We were proposing a set of measures, and we feel very close to the positions that are outlined in the report that was presented by deputy Aguinaldo Ribeiro (PP-PB). There are still points to detail, but progress has been made”, he said. Ribeiro reported the text authored by Deputy Baleia Rossi (MDB-SP).

He says that the FPA pleads that the sector be considered “in the breadth of its chain”. “Often, an image is disseminated that the sector is less taxed in relation to other sectors of the economy, such as commerce and industry. When we look at the chain as a whole, we see that the high taxation that exists in Brazil also affects the agro sector”, he says.

The National Confederation of Agribusiness, on the other hand, assesses that, in the tax reform projects that are being discussed in Congress (such as PECs 45 and 110), the “increase in the tax burden falls on inputs, on the sale of agricultural products and, also, on the collection of the Tax income from rural activity”.

The new tax reform text will be merged with the Proposal for Amendment to the Constitution (PEC 110) of the Senate and PEC 45, in progress in the Chamber, for the construction of the Lula government’s proposal to be presented by April, in accordance with the commitment assumed by the finance minister, Fernando Haddad.

According to Estadão, the proposal should allow the refund of the tax charged on the price of products in the form of credit for low-income families, in a scenario of elimination of the PIS / Cofins exemption for basic basket products – a policy considered distorted by the current team economical. Today, items in the basic food basket are exempt, but the benefit reaches poor and rich alike. The exemption would end, but families with lower incomes would receive a refund of the tax built into the products they buy.

The government has not decided yet whether it will create a dual VAT model (a federal tax and another from states and municipalities), provided for in PEC 110. Or create the Tax on Goods and Services (IBS), the national VAT, which it gathers all taxes on consumption and is in the design of PEC 45. The expectation is that the economic team opts for the creation of the IBS, replacing five taxes – PIS, Cofins, IPI (federal); ICMS (state) and ISS (municipal).

According to the director of courses at York University and executive coordinator of the working group on VAT at the Nucleus of Fiscal Studies at the Getúlio Vargas Foundation (FGV), Melina Rocha, agribusiness in general has a series of special regimes and treatments and is afraid of losing them because the VAT reform proposes the extinction of benefits and differentiated taxation regimes.

“But they don’t see the advantages that the reform will bring, especially for exporters. It is a great benefit, in terms of the possibility of offsetting credit and returning accumulated credit”, says Melina, who participated as a technician in the text of PEC 110. She bets that the tax reform secretary at the Ministry of Finance, Bernard Appy, will a rescue of PEC 45, since he was one of its technical authors. According to her, the PEC 110 mechanism should be maintained to compensate for losses in the transition to the Manaus Free Trade Zone.

free zone

“The negotiation was made with them, but we think that the very issue of the PEC not being voted on was due to pressure from the Free Zone and agribusiness”, highlights the tax specialist, who recalls that the Constitution and Justice Commission lacked a quorum ( CCJ) for the vote. According to her, one of the major points of discussion is the IPI. In PEC 110, the report maintained the IPI to bring support from the Free Zone. In PEC 45, the IPI is extinguished and incorporated.

Vanessa Rahal Canado, from Insper and former advisor to the Ministry of Economy for tax reform, attributes the resistance of agribusiness and services to the fact that sectors only look at the short-term picture, without seeing the impact on the chain as a whole . This is the case of the rural producer, who has a nominal rate of zero and does not want to be taxed with a rate of 25% of the IBS.

“It is this photograph that they look at, but as the tax is creditable for the next phase of the chain, the 25% rate for rural producers, in the dynamics of purchases and sales, is better than zero and the exemption”, he says.

Most rural producers, due to an incentive, operate as Individuals because the calculation is more advantageous than in the legal entity. Among the incentives that agribusiness does not want to lose is the presumed credit for the cost of purchasing inputs. In his assessment, the decision to prioritize consumption reform over income tax was very positive. “In terms of priority, it is more relevant. We are going to see Brazil grow with the approval of the VAT”, he says.

tree and forest

Domingues says that the sector has already taken part in discussions with the agricultural and service sectors, which, according to him, find it difficult to perceive the advantages of the reform. “The sector is a tree and does not look at the forest. Part of the resistance comes from there. The reform tends to homogenize the tax burden with equal tax for everyone with debits and credits ”, he explains.

*With information from IstoÉ and O Estado de São Paulo

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