Payroll exemption: government postpones voting on project – 05/23/2023 – Market

The leader of the government in the Senate, Jaques Wagner (PT-BA), asked for a view of a project that extends the payroll exemption for 17 sectors of the economy until the end of 2027 and postponed the vote on the proposal in the CAE (Commission on Economics) of the Senate this Tuesday (23).

The decision took place after government ministers Luiz Inácio Lula da Silva (PT) presented divergence in the discussion on the extension of the tax benefit. Upon requesting a review, Wagner made it clear that he was against the postponement.

“There has not yet been unity in the government in this regard. […] I, as the leader of the government, have a role and I’m not going to run away from it to say that I ask for views of this process. I know it’s not just to delay [a votação]. It’s an attempt for us to come up with something closer to a common denominator,” he said.

The postponement of the vote was a request from the Ministry of Finance, headed by Minister Fernando Haddad. The portfolio defends that the exemption be discussed within the scope of the tax reform, with a new design.

In discussions held at the Ministry of Finance, a model under study could relieve at least the portion equivalent to a minimum wage (R$ 1,320) from the remuneration of workers in all sectors of the economy.

In a hearing at the CAE of the Senate, the Attorney General of the National Treasury, Anelize Almeida, stated that a benefit focused on a few sectors of the economy does not consider the country’s macroeconomic situation.

“A proposal that discusses a tax benefit, an indirect tax expense focused only on certain sectors of the economy does not meet, from the point of view of the Ministry of Finance, the full potential that a tax policy of payroll exemption can meet”, he said.

For the Deputy Tax Attorney General, Moisés de Souza, the extension of the exemption until 2027, as is in the proposal approved in the Senate, “does not seem to be the most appropriate, considering that there will be a new discussion [sobre o tema] in tax reform”.

“The appeal we make is that if the project goes ahead, and there are merits in it, that there be a review of the extension period to allow for a review of this in the context of the tax reform”, he said.

The author of the proposal, Efraim Filho (União Brasil-PB), criticized the government’s position of postponing the discussion. He recalled that, in 2021, the sanction for the extension of the payroll exemption took place on the last day of the year, at 11:47 pm.

For him, the sooner there is legal certainty, the more sectors will be able to prepare to invest. “It’s opening a branch, hiring more people, taking fathers and mothers out of the unemployment queue”, he defended.

The proposal would be voted on this Tuesday in a terminating character in the Senate CAE and, if approved, would be taken to the Chamber. With the government’s request for a view, the vote should be held next week.

Payroll exemption began during the Dilma Rousseff (PT) government, in 2011, and had successive extensions. Exempt sectors no longer pay a 20% rate on wages for Social Security and other contributions and transfer from 1% to 4.5% of gross revenue as tax.

The last extension of the tax benefit took place in 2021, and the deadline ends at the end of this year.

The proposal’s rapporteur, senator Angelo Coronel (PSD-BA), made an alteration in the original text. In the opinion, he establishes that municipalities with a population of less than 142,633 inhabitants will have a reduction in the social security contribution rate on payroll from 20% to 8%.

Coronel says that the measure has no impact on public coffers and does not need a counterpart, because “it is an improvement of the federative pact”. “The Union stops collecting the contribution from the municipalities, having a neutral net effect on the public sector”, he defended.

In practice, according to representatives of the benefited sectors, payroll exemption encourages formal hiring.

“The exemption does not mean tax waiver, but investment. We will have lower social costs, such as Bolsa Família, because people will be working. We will reduce informal employment and pejoização, we will have job creation, increase in Tax Income and boosting the economy,” said Vivien Suruagy, president of Feninfra (National Federation of Call Centers, Installation and Maintenance of Telecommunications and IT Networks Infrastructure), in a hearing held at the Senate CAE prior to the vote.

The 17 sectors benefiting from the exemption are: footwear, communication/journalism, call centers, information technology services, communication technology services, apparel/clothing, civil construction, construction companies and infrastructure works, leather, vehicle manufacturing and bodywork, machinery and equipment, animal protein, textiles, integrated circuit design, subway-railway passenger transport, collective road transport and road freight transport.