Payroll exemption: Haddad defends postponing discussion – 06/14/2023 – Market

The Minister of Finance, Fernando Haddad, said this Tuesday (13) that the extension of payroll exemption violates provisions of the Constitution and defended that the issue be discussed more widely in the second phase of the tax reform, which the government hopes to deal with in the second half of this year.

The measure was approved by the CAE (Commission on Economic Affairs) in the Senate this Tuesday morning, in a setback for the economic team. The text still needs to pass the vote on amendments in the committee and also by the Chamber of Deputies. The potential impact on accounts is at least BRL 9.4 billion.

Parliamentarians in favor of the measure argue that it is necessary to guarantee the maintenance of jobs in sectors that are intensive in labor. In the current format, the benefit includes 17 segments and is guaranteed to last until December 31, 2023. The project wants to extend this period until the end of 2027.

“We will insist that the opportunity for this discussion is not now. It is after the tax reform, so that we can look into it. There is already a team working on this internally, and we want to have this debate with Congress”, he said. the minister.

“Congress itself approved a constitutional amendment saying that this type of benefit had a date to end […] The decision, in my opinion, violates the constitutional provision. What we are going to present is another way. We are preparing a proposal to be forwarded in the second half.”

According to Haddad, this new project should only be sent after the enactment of the first phase of the reform, which deals with taxes on consumption. The PEC (proposed amendment to the Constitution) is under discussion in the Chamber and still needs to pass through the Senate.

“We are always honoring the pledged word”, said the minister. “And I am asking for this confidence that, after the tax reform, we will enter the second phase of the reform, where those taxes that were not dealt with in the first phase can be redesigned. But for that, time is needed, technique is needed”, added.

For him, now extending the payroll exemption could give a “bad signal” in the face of the government’s attempts to obtain support in Congress for the necessary measures to rebalance the public accounts. Haddad also argued that the current benefit is valid until the end of the year, which would give the government time to propose an alternative solution.

The payroll exemption policy has already been extended several times and, in the current version, covers 17 sectors: footwear, call center, communication, apparel and clothing, civil construction, construction companies and infrastructure works, leather, vehicle manufacturing and bodywork , machinery and equipment, animal protein, textiles, information technology, communication technology, integrated circuit design, subway-railway passenger transport, collective road transport and road freight transport.

Extending the benefit to these segments reduces the collection by at least R$ 9.4 billion a year.

The version approved by the CAE also reduces the social security contribution paid by municipalities with up to 142,600 inhabitants from 20% to 8%, enhancing the impact.

The parliamentarians’ argument is that smaller city halls have little of their own revenue and receive smaller transfers from the FPM (Municipal Participation Fund), accumulating debts with Social Security.

Senator Efraim Filho (União Brasil-PB), author of the proposal, says that the measure is important to avoid layoffs in sectors that are labor intensive. The group estimates that the end of the policy would affect 600,000 workers, including layoffs and the absence of new hires.

“The government no longer has these revenues. having to pay costs”, says the senator.