Haddad’s economic package tries to alleviate “hole” in public accounts

The government’s attempt to change the current payroll tax relief model seeks to alleviate the “hole” in public accounts, which reached 1.08% of GDP in the 12 months ending in October, according to data from the Central Bank. The current system, which provides for a reduction in charges for some sectors of the economy, costs R$12 billion per year for state coffers and the proposed one, R$6 billion.

The change is part of a set of measures announced by the Minister of Finance, Fernando Haddad, this Thursday morning (28) and represents an effort to try to fulfill the promise of zero deficit for next year – a thesis that economic agents believe that it will be difficult to achieve. They point out that a deficit of up to 1% of GDP is acceptable.

An obstacle to achieving the goal is the PT, Haddad’s party. Both President Luiz Inácio Lula da Silva and the leader of the party, Gleisi Hoffmann, defend more public spending, aiming for the 2024 elections.

What Haddad stands for

In addition to the gradual re-encumbrance (return of taxes) of the payroll for 17 segments, two other points were considered by Haddad:

• Revocation of the Emergency Program for the Resumption of the Events Sector (Perse), created during the pandemic and extended by Congress, in May, until 2026. Part of the tax rebates in this program will be gradually revoked.
• Imposition of a tax compensation limit for companies that won court decisions for undue payments in previous years.

The measures will be sent through a provisional measure to Congress later this year. The final details are being defined by the Civil House.

Haddad said he will renegotiate a “gradual repayment, analyzed sector by sector” with deputies and senators. On the 14th, Congress overturned President Luiz Inácio Lula da Silva’s veto of the bill that extended the payroll tax exemption until December 2027 for 17 segments of industry and services. that of communication, in which the People’s Gazette is included, is one of the beneficiaries.

Haddad’s idea is not necessarily a return to the 20% rate charged on payroll. “There is a new ingredient that we want to test, which is the idea of ​​exempting the first minimum wage that the worker receives from payment,” said the minister. It is a scheme similar to the collection of income tax that occurs in bands.

Companies would also be classified into two categories, with the first having a reduction from 20% to 10% of revenue and the second to 15%. The categories to be included will still be defined by the government.

These resources would come with the revocation of Perse, which granted exemption from PIS/Cofins, IRPJ and CSLL for five years. According to XP Investimentos, the impact of the return of taxation, which will be partial (PIS/Cofins and CSLL in 2024 and IRPJ in 2025) is estimated at R$6 billion, enough to offset the new payroll tax relief program.

Another measure that the government intends to implement is the repeal of the reduction in the rate from 20% to 8% for small municipalities. “This is an important change since, in our estimates, there would be a loss of R$11 billion resulting from this measure”, highlights the broker.

At the same time, the government announced that it will implement a program to analyze and discuss municipal pension problems.

In addition to these measures, the government also announced that it will limit the volume of tax credit that can be used to pay taxes to 30% per year, but only for companies that have inventories exceeding R$10 million. The change could bring a gain of R$20 billion, according to official estimates.

Market assessment

XP assesses that the proposal presented by the government is positive from a fiscal point of view. According to the broker, the change in the payroll tax relief system, in addition to reducing the impact to just R$6 billion, reduces distortions and increases the equity of the tax system.

“Perse, in turn, has already fulfilled its function, given that the events sector already operates at levels close to or above pre-pandemic levels, and it makes no sense to maintain it. Finally, limiting the use of tax credits should have a direct effect on net revenue, improving the primary result in the short term, but there is a high probability of judicialization”, highlights the institution.

According to Felipe Salto, chief economist at Warren Investimentos, the announced measures should help balance payroll tax relief, including the intended change to this program.

“From the point of view of the effect on revenue, limiting tax compensation to 30% is quite positive, in my opinion, as this instrument has been used increasingly, to the detriment of the Treasury”, highlights the economist.

On the other hand, the Movimento Desonera Brasil, formed by 17 sectors of the economy, criticized the measure announced by the Minister of Finance. These sectors employ more than 9 million people and will be directly affected by the government’s decision. In a note, the movement pointed out that changing the current form of tax relief “is not reasonable” and will bring “legal uncertainty”.