Government studies less abrupt measures to re-encumber payroll

The government of Luiz Inácio Lula da Silva (PT) may propose to the National Congress that the re-encumbrance of the payroll of 17 sectors of the economy be carried out through a longer transition period. This would be accompanied by alternatives to offset the revenue expected from the measure – the estimate is that, in 2024, the cut in benefits will generate R$16 billion for public coffers.

The alternative of “smoothing” the transition between exemption and reinstatement would be an attempt by the government to avoid a new defeat, since, due to the urgency and relevance of the matter, the president of the Senate and Congress, Rodrigo Pacheco (PSD- MG) can simply return the PM without even appreciating it, which would invalidate it. The agreement would have been established between the government and Pacheco, from which discussions on the topic will be conducted in the coming weeks, according to the newspaper Folha de S.Paulo.

The proposal comes after widespread controversy generated by the issuance of a Provisional Measure (MP) at the end of December, during the Legislative recess, through which Lula established the reimbursement of the payroll, even after this measure had been vetoed by a large majority in Parliament. .

Longer transition and compensation with higher taxes

The Minister of Finance, Fernando Haddad, is expected to meet with Pacheco to discuss the proposal on Monday (15). The Executive would be open to negotiating a longer transition, so that the resumption of full collection on the payroll only takes place in 2029, but assumes that the ideal would be to start reducing the benefit this year.

Congress had renewed the exemption until 2027 and the law was vetoed by Lula, but parliamentarians overturned the presidential veto. But the MP once again restricted the scope of the tax benefit from 2024 onwards and established a gradual increase in costs for activities that maintain it until full collection returns in 2028.

The edition of the MP resuming the re-encumbrance faced strong resistance from business entities and congressmen, who accused the government of defying the will of the National Congress.

Pressure to return the MP

Since the MP was published, Pacheco has been pressured to return it after the return of legislative activities, on February 1st. The Parliamentary Entrepreneurship Front sent a letter requesting the return of the Measure. The Movimento Desonera Brasil, which brings together 17 sectors that employ more than 9 million people, also formally asked for the text to be returned to the government.

If the MP is not returned or modified, the new rules will increase the social security costs of companies in 17 sectors, which have already stated that they will make job cuts. Union centers estimate that the losses could reach up to 1 million jobs, and that there will be a negative impact on exports, especially in the footwear sector.

The government’s economic team argues that the re-encumbrance is part of the actions to try to maintain the goal of eliminating the deficit in public accounts this year. After meeting with Pacheco, the executive secretary of the Ministry of Finance, Dario Durigan, stated that the government has presented technical data that prove the need to maintain the provisional measure.

The Novo Party filed a lawsuit with the Federal Supreme Court (STF) against Lula’s MP, requesting the suspension of its effects. The acting president of the Court, Minister Edson Fachin, considered that there was no urgency to analyze the measure, which should be evaluated by the case’s general rapporteur, Minister Cristiano Zanin, after the Judiciary recess.