Lira measures bench support for tax reform – 07/03/2023 – Market

The president of the Chamber of Deputies, Arthur Lira (PP-AL), began to measure the support of party benches for tax reform at a time when governors and mayors of capitals are increasing pressure in an attempt to obtain changes in the text or postpone the vote.

According to allies, Lira asked the leaders to indicate how many votes each bench is capable of delivering, considering the current text of the rapporteur, deputy Aguinaldo Ribeiro (PP-PB), and what are the main obstacles to greater membership, whether federative or sectoral issues .

The PT, party of President Luiz Inácio Lula da Silva (PT), has already signaled that it will deliver 100% of its votes in the House —the acronym has 68 deputies. Already the PP of Lira, according to allies of the mayor, can deliver about 90% of the 49 possible support.

As it is a PEC (proposed amendment to the Constitution), the text needs the support of 308 deputies in two rounds of voting.

“We first need to have a result of the score of the parties, of how the benches are”, said Lira this Monday (3). According to him, the text will be put to a vote “when we see an adequate quorum”.

“Votes, of course, are inherent to each parliamentarian. I just hope that the climate continues as a project of interest to the country, not just the government. So that this issue does not turn into any kind of battle between government and opposition”, added the president of the Chamber.

The governor of São Paulo, Tarcísio de Freitas (PL), has led one of the poles of resistance to tax reform. Last Sunday, he tried to mobilize the state parliamentary group (which has 70 deputies) in defense of changes in the proposal.

However, the coordinator of the state bench himself, deputy Antonio Carlos Rodrigues (PL), said that he would not risk a joint position. “Imagine me asking the PT to vote against it? I can’t tell you before, but I assume it won’t be homogeneous”, he said. There are also cases like that of Deputy Baleia Rossi (MDB-SP), author of the PEC that today serves as the basis for the discussion and staunch defender of the measure.

There is a distrust among supporters of the reform that Tarcísio is using the agenda to strengthen himself as an exponent of the opposition.

Regardless of possible political interests, the rapporteur is dialoguing with the benches and negotiating adjustments to the text to try to disarm resistance raised by the states, municipalities and part of the service sector.

Representatives of these groups arrive in Brasília this week to try to increase the pressure. This Tuesday afternoon (4), the FNP (National Front of Mayors), which brings together capitals and large cities, organizes an event in the Green Hall of the Chamber, where parliamentarians, members of the press and representatives of society circulate.

“It’s a coincidence [o ato ser no mesmo dia dos governadores]but if we have points of convergence, we’ll unite”, says the president of the FNP, Edvaldo Nogueira.

According to him, the capitals and large municipalities are opposed to the extinction of the ISS, a municipal tax levied on services. The assessment of the FNP is that the measure violates federative autonomy and will also cause a loss of revenue.

“The service sector is going to gain prominence in the economy, the tendency of the ISS is to grow. They want to grab that part, and we don’t know how much is left for us”, criticizes Nogueira. According to him, the entity does not have calculations of possible losses because the federal government has not yet calculated what the rates of the new tax would be.

On Tuesday night, members of the so-called Codesul (South Development and Integration Council (Codesul) and Cosud (South and Southeast Integration Consortium) participate in a meeting at a hotel in Brasília to discuss the details of the proposal.

The presence of governors Cláudio Castro (RJ), Eduardo Leite (RS), Eduardo Riedel (MS), Jorginho Mello (SC), Ratinho Júnior (PR), Renato Casagrande (ES), Romeu Zema (MG), in addition to Tarcísio and parliamentarians from these states.

One of the themes should be the so-called Federative Council, which São Paulo is fiercely opposed to. The figure is foreseen in the PEC and would be responsible for the collection of the IBS (Tax on Goods and Services), which replaces the state ICMS and the municipal ISS.

The Council, formed by representatives of states and municipalities, would collect the new tax and pass on the revenues due to each entity of the federation, already considering the migration of the collection to the destination —that is, to where the consumption of goods and services takes place. services.

Today, part of the collection is done at the source, where the production of goods and services takes place. Producer states are some of those that most resist the institution of the Federative Council.

São Paulo’s proposal, adopted by other states resistant to the reform, is to maintain the current design of decentralized charging. Thus, IBS would be collected in the producing state, with subsequent transfer to consumption locations through a clearing house.

The São Paulo government argues that the measure ensures greater autonomy and “direct control of the state over its source of revenue, with simpler operation than the process of centralization and full sharing of revenue”, according to a presentation made by Tarcísio to parliamentarians at dinner on the night of Sunday (2).

Other states, as well as some experts, reject the idea of ​​a clearinghouse as they believe it creates problems for taxpayers, since there will be questions about how to collect tax credits obtained from paying the new tax in earlier stages of production.

In addition, consumer states, benefited by the principle of destination, would be in the hands of local producers waiting for the transfer of resources that are rightfully theirs.

In countries like Canada and India, which adopt the dual VAT (Value Added Tax) model proposed for Brazil (with a tax for the federal government and another for states and municipalities), collection is centralized at the federal level . As most governors and mayors reject the Union’s participation in this task, the Council would fulfill this role.

According to interlocutors, the rapporteur for the reform is still working on a possible compromise to reduce resistance in São Paulo and prevent the state, which has already stopped other attempts to change the national tax system, from ending up stalling the negotiations once and for all.

To allies, the president of the Chamber has said that there is no “jealousy” of the text released now and that there is room for changes, as long as the alternatives presented “stop standing” and do not mean the landing of the other states.

The São Paulo government also wants a definition, as of now, on how the FDR (Regional Development Fund) will be distributed, whose objective is to guarantee regional incentive instruments to the states. Current tools, such as rate reduction, calculation base or granting presumed credits, will no longer be viable after the unification of ICMS in IBS.

The Union has already signaled an annual contribution of BRL 40 billion, but the criterion for sharing this money is the subject of controversy among the states. Governors of regions such as the North and Northeast want to adopt the inverted GDP (Gross Domestic Product) criterion, which would benefit poorer locations, but there are also other proposals on the table.

In São Paulo’s calculations, a weighted average of the proposals discussed at Comsefaz (National Committee of Finance Secretaries) would result in a share of just 3.28% for the state —a transfer that would start at R$262 million in 2029 and reach BRL 1.3 billion from 2033, considering the gradual implementation of the fund.

A criterion that takes into account the population of each state, in turn, would raise the values ​​to BRL 1.76 billion in 2029 and BRL 8.8 billion from 2033 onwards, equivalent to 22% of the fund. This alternative would be defended by Rio Grande do Sul.

An intermediate format, preferred by São Paulo, would be to distribute according to the number of beneficiaries of social programs enrolled in CadÚnico. In this design, the São Paulo government would receive 14.62% of the FDR, equivalent to R$ 1.17 billion in 2029 and R$ 5.85 billion from 2033 onwards.

Amid the onslaught of opposing sectors, Fiesp (Federation of Industries of the State of São Paulo) is preparing a joint effort with other sectors to launch a manifesto in favor of the reform. The entity’s assessment is that it is important to take a stand in defense of the proposal as criticism grows.