Government should revoke MP on payroll exemption

After almost three hours of meeting, the Minister of Finance, Fernando Haddad, and the President of the Senate, Rodrigo Pacheco, decided that the government’s Provisional Measure on the payroll tax relief for the sectors that employ the most should be revoked. The information was released by CNN Brazil on Monday night (15).

In its place, the government may present another provisional measure or bills with the other points of the MP. But there will be no reburdening of companies and the benefit of reducing the social security rate from 20% to 8% on employee salaries will also remain, for municipalities with up to 156,216 inhabitants.

Haddad and Pacheco did not give interviews, but the government leader in the Senate, Jacques Wagner (PT-BA), who participated in the meeting, said, upon leaving, that the MP will not be returned by the president of the Senate and that the proposals for compensation for revenues will still be evaluated. He also reported that Haddad should meet with the president of the Chamber, Arthur Lira about alternatives.

Exemption is a defeat for Haddad, who needs to increase revenue

If the revocation of the MP is confirmed, it will be a defeat for the government and, particularly, for minister Fernando Haddad. The MP, published on December 28, was interpreted by parliamentarians as an affront to Congress, which had already approved the extension of the benefit.

With approval, parliamentarians maintained the replacement of the employer’s social security contribution (CPP), of 20% on employees’ first minimum wage, with rates of 1% to 4.5% on gross revenue, in force since 2011 for 17 sectors of intensive labor force in the country. President Luiz Inácio Lula da Silva (PT) even vetoed the project, but the veto was overturned by a large majority in the Chamber and Senate.

Haddad justified the publication of the MP based on the estimated cost of the exemption for this year, which was not included in the Budget. As Congress approved, it is estimated that the impact of extending the exemption would be at least R$18.4 billion in 2024.

Of this total, the total value of the tax exemption for companies in the 17 sectors would be R$9.4 billion. Another R$9 billion would go to municipalities with up to 156,216 inhabitants due to the reduction in the social security rate from 20% to 8% on civil servant salaries, a point also suspended by the MP.

The MP also extinguished, until 2025, the tax benefits granted to event promotion companies through Perse (Emergency Program for the Resumption of the Events Sector), a point that must be resumed by bill.

Parliamentarians press for the return of the MP

The president of the Senate, Rodrigo Pacheco, has been under strong pressure to return the MP. Parliamentary fronts and opposition leaders have intensified the request. Pacheco, in turn, has been betting on diplomatic solutions. At the time of the announcement, he admitted “strangeness” with the MP’s edition. Haddad even threatened to take the issue to court, but President Lula encouraged a negotiated solution.

Hours before the meeting, Haddad stated that he would show Pacheco the impact of the exemption on the Budget, and try to find alternatives. One of the possibilities mentioned is the taxation of online purchases less than US$50. “For us, the important thing is this: finding an alternative to the approved budget and preventing the capture of interest groups from the public budget. The budget is public, when you make a tax waiver you have to compensate”, declared Haddad.