Lula, Planalto and PT do not fight for tax reform – 7/5/2023 – Vinicius Torres Freire

The government has been releasing or promising more money to parliamentarians since the end of last month. This is not about corruption, but about amendments or rural credit, for example. He will finally hand over the keys of the Ministry of Tourism to União Brasil. The delay threatened to break some of the government’s fingers in Congressional votes.

Is it an effort for tax reform? No. The Planalto and the Treasury are committed to approving the change in Carf, the administrative court for disputes between taxpayers and the Revenue, so that the government will once again have a tie-breaking vote.

The Treasury is still fighting for tax reform. But Planalto ministers and advisors and, in particular, Luiz Inácio Lula da Silva left the tax negotiation in the hands of Congress and Treasury representatives. At the end of Wednesday, Alexandre Padilha, Minister of Institutional Relations, arrived to lighten the mood, which was one of unprintable words about the “political wing of the government”.

This is what the parliamentarians involved in the reform say, as well as people at the top of the União Brasil, the Republicans and the council of chiefs close to Arthur Lira (PP-AL).

Up to a certain point, it is reasonable that the government and the president do not dive headlong or let go of congressional matters, for political and institutional reasons. However, the tax reform is the main change to be promoted in this government, in theory with its support.

It is a reform that may deserve the horrible cliché adjective “historic”, as it would change a lunatic and old system of more than half a century. It will not have immediate practical effects (it will take about three years to start), although it will change the economic climate and will be fundamental for the country to grow more over the next decade. If it falls now, it will be very difficult for it to return to the agenda soon.

However, there was no major national awareness campaign. Lula talks about the subject as if he were an observer. He is inefficiently occupied with the Mercosur-European Union agreement, with the fantasy of a single or common currency, with Venezuela.

In everyday politics, the Planalto does little to win votes. PT is gone. The party is not committed to reform and, in Congress, the joint action of PT members is null. But the PT noisily fought for the project to cut interest rates by 0.25 percentage points in August.

Meanwhile, governors, in particular Ronaldo Caiado (União Brasil-GO), mayors of larger cities, part of agribusiness, large commerce and certain “digital” services are trying to distort the reform.

They take advantage of the dispute between the South-Southeast and Northeast-North in order to make more exceptions. South-Southeast, São Paulo at the forefront, fears tripping the future Federative Council that will manage state and municipal revenues. They want guarantees.

Some sectors think or say they will pay more tax, often based on crude, inept calculations or mere hacking. They try to enter the list of exceptions for the uniform and general IBS rate, the tax that will replace ICMS and ISS.

The agricultural caucus, for example, wants an even greater reduced rate for products of interest to them or, then, that the reform establishes a higher reduction range (from 50%), to be fixed later on.

Other sectors will piggyback on the bargaining opportunity. If not now, they will try to regulate the reform. It would be an open door for the transformation of changes in taxes into a monstrosity and a house of tolerance for favors for particular or frankly rogue interests.

In the meanest political calculation, the approval of the essential part of the reform would be a great victory for Lula 3. A defeat will sour the climate.

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