Haddad has a bigger plan – 08/04/2023 – Vinicius Torres Freire

The new “fiscal framework” is ready. There should be nothing new in relation to the plan presented by Fernando Haddad. The Farm is only working on defining technical details, such as the concept of “recurring revenue”. More on that later.

But the minister has a larger fiscal plan, to be disclosed by the end of the year, which goes beyond the “NRF”, “New Fiscal Rule”, as Haddad called the “framework” in an interview with Sheet.

The government has a plan to curb “tax spending.” The program is headed by Planning, by Simone Tebet, who has a department dedicated to the subject (expenses review and programs in general), but will have the great and very interested collaboration of the Treasury and the TCU.

“Tax expenditures”, as the Treasury says, “are government ‘expenditures’ carried out through the reduction of the tax burden, instead of direct disbursement”. In the Revenue accounts, federal tax spending in this 2023 would be R$ 456 billion. The federal government’s gross revenue should be R$ 2.3 trillion this year; net, after transfers to states and municipalities, R$ 1.86 trillion.

It is not possible to take this tax expense account literally. If certain taxes are collected again, certain businesses disappear, there are changes in the behavior of people and companies, etc. Still, it’s an awful lot of money.

Haddad says that the government starts to change this after the tax reform, the consumption taxes (after September, imagine).

The highest tax expenditures are: Simples tax reduction (19.4% of the total), Manaus Free Zone (12.1%), agriculture and agroindustry (11.8%, of which 7.6% for the basic food basket ), philanthropic (7.8%), income tax deductions (6.6%) etc. The list is huge and has a lot of favor hidden there. The government intends to reduce these waivers gradually, depending on the need for revenue and political conditions.

“In Brazil, what is feasible? Changing the speed of the variables. This expense has to grow proportionally more than that, to reach something fairer, more balanced, including with regard to tax expenditure, more than R$ 400 billions. Will society be charged to cut tax spending? Benefits, privileges and such?”, says Haddad.

It’s a huge fight. Lobbyes usually win. It is a major cause of inequity and economic inefficiency.

“It’s a set of distortions that need to be corrected with time. I can’t do everything at the same time, because nothing will be done, it will paralyze Congress. He has to cut this salami into slices, to organize it. measurement calibration [tamanho de cortes ou gastos] depends on how decisions are made. But we are going to do it in the first year of government”, says the minister.

As for the framework, an important definition remains: that of recurring revenue. Under the NRF, federal government spending can grow, per year, by the equivalent of 70% of revenue growth (with a ceiling increase of 2.5% per year).

The government also collects resources by selling assets, by receiving money from a concession, from the sale of oil exploration rights, dividends (part of the profit) from state-owned companies, etc. These are generally extraordinary recipes. They cannot be included in the regular increase in revenue and, therefore, expenditure (as they would cause unsustainable increases).

Equity sales or concession income should be included in the “extraordinary” account, as well as perhaps royalties and even part of dividends. The people at the Farm are still working on this.

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