Government studies to return the entire amount of taxes on the basic food basket to the poorest – 04/04/2023 – Market

The government can return all the tax collected with the return of taxation on the basic food basket for low-income families, within the model under study for the consumption tax reform.

This possibility was cited this Tuesday (4th) by economist Rodrigo Orair, director of the Tax Reform Secretariat of the Ministry of Finance, during an event held by Bradesco BBI.

A working group of the Chamber is still studying what treatment will be given in the taxation of food, one of the themes that most concern the agricultural sector. There are basically two possibilities on the table: taxation of these products with tax refunds to the poorest or maintenance of the current rule, which benefits the poor, rich and companies that did not pass on the tax reduction.

“The best is to have the tax with the broadest base, the lowest rate and return all the tax collected to low-income families”, stated Orair. He stressed that the final decision will be taken by the National Congress, which is already working on two proposals that are being discussed in Parliament and should present a new text in May.

A 2021 work by the Pra Ser Justo movement, together with researchers from UFMG (Federal University of Minas Gerais), estimated that a tax refund system for poorer people can benefit more than a third of the population with a budget lower than that of the exemption from the basic basket.

Orair stated that the expectation is to approve the tax changes in the Constitution in 2023 and regulate the reform in 2024. It is at this stage that the tax return model can be defined.

The following year, two taxes (PIS/Cofins) would be replaced by a federal contribution on goods and services.

In 2027, the transition from state and municipal taxes (ICMS and ISS) to a new tax on goods and services would begin, which would last from four to six years. “You have this first transition, which will end in 2031, 2032, depending on the report by Deputy Aguinaldo Ribeiro (PP-PB), rapporteur for the reform in the Chamber].”

Although there is the possibility of joining these four taxes into one, Orair stated that the separation of the federal contribution is the most likely scenario indicated by the parliamentarians of the working group.

It would still remain to approve the exchange of the IPI (Tax on Industrial Products) for a Selective Tax to discourage behavior that is harmful to health and the environment. In this case, says the director, it is necessary to find a solution for the Manaus Free Trade Zone, where companies are exempt from this tax.