New tax framework needs to be ‘simple, flexible and applicable’, says Vilma Pinto, director of IFI

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In the evaluation of the economist and director of the Independent Fiscal Institution (IFI), of the Federal Senate, the success of the new rule, which will be created by the team of the Minister of Finance, Fernando da Fazenda, depends on the combination of these three elements ‘It has to have simplicity, flexibility and applicability’, says economist about new fiscal framework Economist and director of the Independent Fiscal Institution (IFI), Vilma Pinto, says that the new fiscal framework, which the federal government is preparing to replace the spending ceiling, needs to be simple, flexible and applicable. “We have to be able to balance the issue of simplicity well, the rule has to be simple so that we can provide transparency and communicate well; it has to have simplicity, flexibility and applicability. So we have to be able to combine these three elements to that we can be successful with the new rule that will be created”, said the economist in an interview with GloboNews Em Ponto. According to the economist, the history of fiscal rules already implemented in the country, including the spending ceiling created by the Michel Temer government (2016/2018) and extinguished by the so-called Constitutional Amendment Proposal (PEC) of the Transition, can be used “as a apprenticeship”. “The first thing that needs to be taken into account is following the principles, which we have in the international literature and when we look at our tax rules”, she says. Uncertainties Economist says that the fiscal rule has to take into account the quality of public spending Despite the uncertainties, the economist declared that she sees as positive some signals given by the Ministry of Finance about the new fiscal framework, such as the adoption of the ratio — a percentage — debt/GDP as a criterion for assessing the sustainability of the country’s public debt. “I think that having a horizon for the public debt, we can have as a goal the balance of the accounts based on the sustainability of the debt/GDP ratio. The goals used to be set with the objective of maintaining this stable trajectory. We lost that in recent years largely due to the serious fiscal and economic crisis that the country has faced. We need to recover these elements.” In the evaluation of the specialist in public accounts, an equally important aspect, which must be pursued by the Ministry of Finance, is not only control, but also the quality and efficiency of public spending. “[É importante] Provide a perspective on the sustainability of public accounts. And the fiscal rule has to take into account the quality and efficiency of public spending.”

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