Haddad celebrates Senate approval of measure edited by Bolsonaro

The Minister of Finance, Fernando Haddad, celebrated the approval of a provisional measure issued during the government of former President Jair Bolsonaro (PL) that could raise up to R$ 23 billion to the public coffers next year.

On Wednesday (10), senators validated the proposal that changes the rules of the so-called “transfer price”, which regulates the payment of Corporate Income Tax (IRPJ) and Social Contribution on Net Profits (CSLL) in multinationals with their branches abroad.

Today many companies sell products first to their affiliates, at low prices, and then these affiliates make the sale to the final buyer, at the “real” price, taking advantage of lower taxation in other countries. From now on, such operations will be taxed as if the companies involved did not have this corporate relationship.

The measure is considered essential by the minister to manage to reduce the primary deficit of public accounts this year. With the change in the rule, the government will no longer have an estimated loss of BRL 70 billion, to collect, at first, something between BRL 17.5 billion and BRL 23 billion in 2024.

“[A aprovação é] fundamental. The Revenue estimated losses of around R$ 70 billion a year”, said Haddad to the newspaper “Folha de S.Paulo”. To “Estadão”, the minister said that “the Revenue understands that the projection of BRL 70 billion is the most correct, based on everything they follow in this matter over many years”. “For 2024, it would be reasonable to imagine something between a quarter and a third of that resource we have already managed to recover”, he said.

The approval of the provisional measure by the Senate occurred after Haddad himself called senators during the early hours of the morning, as he is traveling to Japan to participate in bilateral and preparatory meetings for the G7 summit. According to government interlocutors, business entities and even representatives of federal state-owned companies lobbied to try to postpone the entry into force of the new rules until 2025.

According to a report by “Folha”, the minister would have called Senator Davi Alcolumbre (União Brasil-AP), who proposed an amendment to postpone the implementation of the rules, and the president of Petrobras, Jean Paul Prates, to try to avoid supporting any change that could benefit the state-owned company.

The approval of the new rules aligns Brazilian taxation with practices recommended by the Organization for Economic Cooperation and Development (OECD), one of the main flags of the government of Jair Bolsonaro and his Minister of Economy, Paulo Guedes.

Although the new transfer pricing legislation is considered an important step for Brazil to join the OECD, the Lula government does not treat joining the organization as a priority, unlike the Bolsonaro administration. The greatest interest, at this moment, is even in the increase of tax collection.

The new rules also have repercussions in negotiations with companies in the United States, which suffered double taxation, according to representatives of the American Chamber of Commerce (Amcham).