Haddad raises the tone and says that the government can go to the STF against exemption from municipalities

Minister Fernando Haddad, of Finance, raised his tone against the president of the Senate, Rodrigo Pacheco (PSD), this Wednesday (3), and confirmed that the government can appeal to the Federal Supreme Court (STF) to overturn the extension of the provisional measure which relieves part of the municipalities’ payroll.

The measure was decided by Pacheco on Monday (1st) and caught Haddad by surprise, as the exemption was about to expire and would result in a 20% tax rate being charged on the payroll. Despite this, he stated that the decision “does not affect” the relationship with the government.

Haddad, however, showed dissatisfaction and stated, after a meeting with vice-president Geraldo Alckmin (PSB), that the Attorney General’s Office (AGU) “is studying” what can be done to overturn the exemption – the municipalities started paying a tax rate of just 8%.

“AGU is studying the matter. This has not yet been submitted to the President of the Republic. We have to understand that all primary tax expenditure must be accompanied by compensation. This is not me making it up, it’s not the president making it up. It is a complementary law approved by the same Congress,” he stated.

He denied that the possibility of taking the case to the STF is an “affront” to Congress, but that “all Powers should be required to collaborate towards fiscal balance”.

“I think we have to negotiate the fiscal result with Congress. We need the Three Powers to agree to a reorganization of public accounts”, he said in a similar tone to the criticism made on Tuesday (2) of Pacheco’s decision.

The decision to go to the STF or not will ultimately depend on President Luiz Inácio Lula da Silva (PT).

If the tax reduction from 20% to 8% is maintained, it is estimated that the government will fail to collect R$10 billion this year, directly affecting the fiscal goal of closing the gap in public accounts. The provisional measure benefits municipalities with up to 156 thousand inhabitants with the exemption.