Offshore: Congress does not reach a consensus on taxation – 08/26/2023 – Market

The main names of the National Congress differ on the taxation of Brazilian companies abroad (offshore), one of the main proposals that Minister Fernando Haddad (Finance) and President Luiz Inácio Lula da Silva (PT) are trying to approve at this moment.

Questioned by Sheetthe presidents of the Chamber of Deputies and the Federal Senate, in addition to the party, government, opposition, minority and majority leaders of both Houses did not show consensus on the subject.

Of the 37 parliamentarians sought by the report, the 23 who responded said they had no participation in companies of the type.

“[Sou] in favor of taxing offshore companies without corroding the base [da arrecadação com alíquotas altas demais]”, he said to Sheet the mayor, Arthur Lira (PP-AL), arguing that the new tax cannot, as a consequence, affect possible investments by these companies in the country —which could reduce, according to him, the collection of taxes.

“I will wait for the proposal of the PL [projeto de lei]”, responded to the report the president of the Senate, Rodrigo Pacheco (PSD-MG).

As shown to Sheetoffshore taxation was the epicenter of friction between Lira and Haddad, after the proposal was included in the MP (provisional measure) that readjusted the minimum wage to R$ 1,320.

A tense conversation between the two, precisely about the proposal to tax companies or offshore funds, preceded Haddad’s declaration that the House led by Lira has “very great power”.

Lira countered the statements and the leaders of the House mobilized to remove the offshore measure from the minimum wage text, imposing a setback on the federal government.

In the end, an agreement was struck: the topic will be taken up again in a bill with constitutional urgency —which means that it will lock the agenda of the House in 45 days—, to be sent by the Executive.

Of the 23 parliamentarians who responded to the report, 8 said that they still do not have an opinion on the subject, that they are still waiting for the government’s text or that the respective benches have not yet debated the proposal.

Only three have already said against it, all from the opposition bloc to the Lula government: deputy Carlos Jordy (PL-RJ), leader of the opposition, and senators Carlos Portinho (PL-RJ) and Izalci Lucas (PSDB-DF), leaders of your acronyms. All were against taxation.

“I am against any tax increase,” said Lucas. “The government only has this vision of increasing revenue, but it should take care of spending, to improve public spending and avoid waste,” he said.

Of those who were in favor of taxation (12), the only one who did not belong to Lula’s base party was, precisely, Lira. Other names from the PP and Republicans, who negotiate positions in the Executive in exchange for support in Congress, did not respond or had no formed opinion.

The two leaders of União Brasil (the senator from Paraíba Efraim Filho and the deputy from Bahia Elmar Nascimento) said that the issue has not yet been debated within the bench and that, therefore, for the time being, there is no position.

“We understand that it is crucial to correct distortions in the tax system that benefit the richest strata of Brazilian society. The measure of taxation of offshore income is vital to finance the social investments demanded by the country, at the same time as maintaining the fiscal balance and the sustainable economic growth”, said the leader of the government in the Chamber, José Guimarães (PT-CE).

It was not the first time that Lira positioned herself in favor of taxing offshore companies, with the exception that the tax is, in her words, “feasible”.

After the obstacle with Haddad, the president of the Chamber stated that he saw a favorable climate for the approval of the proposal, together with the taxation of the super-rich, but as long as the government complies with what was agreed with the parliamentarians, which modifies the initial idea sent by the government.

The agreement mentioned by Lira cites a change in the text so that the calculation of taxation no longer considers gains from exchange rate variation of those who have the company abroad.

The MP published by Lula and Haddad in April determined that the fluctuation would count towards the collection of taxes.

“The exchange variation of the [valor] principal applied in the entity abroad will compose the taxable capital gain […]”, says the statement of reasons, a document that accompanies the MP, sent by the government to Congress in April.

According to Lira, the removal of this point makes it possible to vote on the proposal. “If it is the text agreed with secretary Dario [Durigan, secretário-executivo do Ministério da Fazenda]Yes [tem clima para aprovar]. Without taxation of exchange variation”, he said on the night of Wednesday (23), after the approval of the readjustment of the minimum wage with the exclusion of taxation of offshore companies.

The president of the Chamber also defended “a feasible interest rate so that the government collects more and those who have it can pay without having to withdraw funds from Brazil and go to other countries with lower rates”.

According to Lira, these are some of the terms of the agreement signed with Durigan, who heads the Ministry of Finance during a trip abroad by incumbent Fernando Haddad, and Geraldo Alckmin, vice-president.

If the removal of the section on exchange variation is not compensated by another initiative, Haddad’s proposal will be dehydrated and will lose its potential for collection.

When it published the MP on the subject, the government announced that it could obtain with the new rules BRL 3.25 billion in 2023, BRL 3.59 billion in 2024 and BRL 6.75 billion in 2025.

The exclusion of the offshore stretch, however, generated a problem in sanctioning the correction of the IRPF table. Lula would have to veto the measure, which was a campaign promise, or he would need to find another source of compensation, to be launched when the new law is sanctioned.

Therefore, according to Durigan, the government will propose the taxation of exclusive funds via MP, which is effective immediately.

The text should bring a device that encourages the holders of these resources to update the equity of the funds by paying a reduced rate of 10% on the income obtained in recent years.

see the numbers

23
leaders, of the 37 wanted, say they have no offshore

12
of the 37 say they are in favor of the proposed taxation

3
of the 37 say they are against proposed taxation

8
of the 37 say they do not have a formed position

14
of the 37 did not respond