Municipalities want payroll tax relief and renegotiate debt with INSS

While the Minister of Finance, Fernando Haddad, tries to guarantee some additional revenue in Congress by reimbursing city hall payrolls, municipal managers are mobilizing to expand the scope of the reduced social security contribution rate, in addition to renegotiating debts with the National Institute of Social Security. Social Security (INSS).

This Tuesday (9), the National Confederation of Municipalities (CNM) brings together its members in the National Congress and hopes to hold hearings with the presidents of the Senate, Rodrigo Pacheco (PSD-MG), and the Chamber of Deputies, Arthur Lira (PP -AL).

“We need to remain attentive and mobilized for payroll relief. We have to maintain our dialogue with the Executive and Legislative branches and it is essential to be in force in Brasília, on April 9, to give voice to our demands”, said the president of the CNM, Paulo Ziulkoski.

Last year, Congress approved a reduction from 20% to 8% in the percentage collected as social security contributions from municipalities with up to 156.2 thousand inhabitants, which benefited 5,367 of the 5,570 municipal administrations. In December, however, the government issued a provisional measure (MP 1,202) establishing the end of this exemption.

On the 1st, the president of the Senate, when extending the validity of the MP, allowed the section of the text that ended the discount to expire, resuming the 8% rate for municipalities with up to 156.2 thousand inhabitants.

What is at stake now is bill (PL) 1,027/2024, proposed by the Treasury, which provides for the limitation of the discount for cities with up to 50 thousand inhabitants (around 2.5 thousand city halls) and the gradual resumption, until 2027 , the 20% rate of the social security contribution on the municipalities’ payroll.

The CNM is not only against the proposal, but also defends that the exemption applies to all city halls in the country, in addition to a renegotiation of the municipalities’ pension debts with the INSS, both in the case of those using the General Social Security Regime (RGPS) , such as those that have their own regimes (RPPS).

The entity defends a set of six measures:

1. relief from contributions to the General Regime for all municipalities;
2. special installments of municipalities’ debts to the RGPS and the respective Social Security Regimes (RPPS);
3. new model for paying court orders by municipalities;
4. equalization of municipal RPPS benefit rules to those of the Union;
5. solution of interpretative impasses in the legislation on contribution and monetization of assets to resolve the actuarial deficit of the RPPS and regarding the contribution to Pasep; It is
6. compensatory measures for the Union related to improving the quality of social security spending, as well as greater efficiency in tax spending.

Regarding the exemption, the CNM wants the rate to be maintained at 8% in 2024 and grow, in a phased manner, to 10% in 2025, 12% in 2026 and 14% in 2027. The idea is that the definitive contribution is equivalent to that defined in the pension reform (Constitutional Amendment 103/2019) for the RPPS.

The special installment of social security debts defended by the municipalist movement is what is foreseen in the proposed amendment to the Constitution (PEC) 66/2023, presented by senator Jader Barbalho (MDB-PA) and which restores the limitation of the installment to 1% of revenue net current (RCL), encompassing debts maturing until February 2024.

With the proposal, the municipalities’ debt to the RGPS, which totals R$248.6 billion, would be reduced by R$86.1 billion. The model advocated for the discharge of court orders by municipalities, also provided for in PEC 66, follows the limitation of 1% of the RCL.

On the federal government’s side, reducing the social security contribution rate only for municipalities with up to 156.2 thousand inhabitants should cost around R$9 billion this year alone, according to calculations by the Ministry of Finance.

Last week, minister Fernando Haddad, who has the goal of zeroing the primary deficit in the current year, said that he does not rule out suing the Federal Supreme Court (STF) against Pacheco’s decision that removed the re-encumbrance of municipalities from MP 1,202 in his extension.

“AGU [Advocacia-Geral da União] is studying the subject. 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”, stated Haddad.