Haddad celebrates progress in Tax Reform – 11/08/2023 – Market

Minister Fernando Haddad (Finance) celebrated this Wednesday (8) the approval in the first round of the Tax Reform in the Senate after 40 years of discussion. Despite this, he regretted the work of opposition members who worked to block the text.

The score in the first round was tight, with 53 favorable photos — just 4 more than the 49 needed for a constitutional change and below what was predicted by the government the day before, which expected the support of 55 senators. There were 24 votes against.

“There was a lot of action on the part of the opposition against the reform. In my opinion, this polarized the debate a little, which is a Brazilian issue. The proposed constitutional amendment was not even presented in this government. It had already been in progress since 2019,” he said .

For him, the discussion in the Chamber — where the proposal returns, as it has undergone modifications in the Senate — will be easier. “It’s whether or not to incorporate [as mudanças] and be able to promulgate. I believe it is possible to enact Tax Reform this year,” he said.

Haddad said he believes that a piecemeal promulgation will not be necessary, as suggested by the president of the Chamber of Deputies, Arthur Lira (PP-AL).

“I don’t believe it will be necessary [promulgar de forma fatiada]. I believe that it will, just as the Senate gave itself the right, because it has autonomy, to change something, the Chamber will evaluate what the Senate did and what is common to both Houses can be enacted and what is not common remains for another opportunity, this has already happened in the past”, said Haddad.

The minister assesses that, despite the series of flexibility made in both houses, the core of the proposal is maintained.

“I think the backbone is there, with everyone’s agreement. It’s one detail or another, but the backbone of the Tax Reform — dual VAT, non-cumulative, investment relief, export relief, exempt basic food basket, more cheap—it’s everyone’s business. That’s why it received this massive support; if not, it wouldn’t pass,” he said.

“I think Aguinaldo [Ribeiro] he is already ready to change the text or not, he already has exactly the map of what needs to be done to listen to the deputies and take it to the Chamber plenary, perhaps this year, for promulgation by the National Congress”, he stated.

“The night is still long, but the first round of the Senate gives some comfort that the Tax Reform after 40 years will finally pass,” he stated.

Haddad once again expressed the assessment that the proposal does not receive the highest score due to the various concessions made during the processing — which should increase the reference rate and reduce the gain in economic growth resulting from the system change. According to him, however, the country is leaving behind a system with a grade 2.

“No [vamos] for a tax system rated 10, because there had to be a lot of discussion and a lot of agreement to reach this result, but we will certainly be today, if the constitutional amendment is enacted, in a much more comfortable situation than we are today. This PEC deserves a grade of 7.5, with praise,” he said.

For him, the proposal could receive top marks if a provision is approved that requires a review of exceptions every four years. “This will all help the country to find a balance between sectors and a federal balance,” he said.

“When technique meets politics, the end result is satisfactory. The technician will say: ‘it could be better’. The politician: ‘it could be better’. But the fact is that in this meeting, in this combination of efforts, we improved a lot which was very bad in Brazil”, he said.

The minister said that the proposal contains a series of new elements “that will improve our system and make it less unfair, less opaque, more inviting to national and foreign investment.” “We’re in a good place,” he said.

The statements were made after the Federal Senate approved the reform that provides for the merger of PIS, Cofins and IPI (federal taxes), ICMS (state) and ISS (municipal) into a VAT (Value Added Tax).

The system will be dual: one portion of the rate will be administered by the federal government through CBS (Contribution on Goods and Services), and the other, by states and municipalities through IBS (Tax on Goods and Services).

The definitive rates for each tax will be detailed later, in a complementary law, but government estimates indicate that the total collection of the new VAT should be between 26.9% and 27.5% — already taking into account the effect of the additional exceptions incorporated in the opinion of the rapporteur, senator Eduardo Braga (MDB-AM).