Sectors outside the exceptions will have a brutal increase in tax burden, says Ives Gandra

Presented last week, Senator Eduardo Braga’s (MDB-AM) replacement for the proposed amendment to the Constitution (PEC) for tax reform will “brutally” increase the average tax burden on taxpayers, due to the number of exceptions, he assesses jurist Ives Gandra Martins, specialist, among other areas, in tax law.

For him, despite including several sectors in the list of beneficiaries with a reduced rate of new taxes, the new version of the PEC still significantly increases the weight of taxes on some categories. The agricultural sector, for example, currently has a tax burden of around 4.5%, but will pay at least 10% if the standard rate is between 26% and 28%.

“The services sector pays ISS, the maximum rate of which is 5%. As it is in the non-cumulative system, plus 3.65% [de PIS e Cofins], gives 8.65%. With all exceptions for some of the segments, [a carga tributária] it could increase to 21%, even with the 30% reduction”, comments the jurist.

For him, it was important that the bills that will regulate the reform were publicly discussed, together with the PEC. “We could not have approved constitutional principles without having the complementary and ordinary law projects and the calculations of the impacts that all of this will cause in city halls, in the states, in the Union and for all taxpayers in general”, he says.

“We are approving constitutional principles without knowing everything that will represent the application of this theory, of a new system, which will replace the old, but which will coexist with the old until 2033”, he says.

He assesses that the proposal, which should simplify the current consumption tax system in Brazil, could end up complicating it even more. “I had already said that I was greatly impressed that, to simplify our Constitution, in the tax system, they created three times as many constitutional provisions,” he says. “From 33 pages of constitutional provisions, our rapporteur increased it to 44. We now have an even larger project to simplify what they considered extremely complex in the constitutional provisions placed in the Federal Constitution today.”

The lawyer says he is not against the reform, but against the haste in discussing a PEC without information about the impacts it will have on municipalities, states, the Federal District and the Union. “I was greatly worried about the report by Senator Eduardo Braga, who sought to reconcile the several questions received, but the number of exceptions increased even further, bringing, in my opinion, even more complications”, he says. “Every sector that is not exempt will see a brutal increase in the tax burden, with the exception of course the financial sector and industry.”

“But politicians must understand much more about tax law than I do, as I have only been dealing with it for 65 years, I have books written in Brazil and abroad about tax law and I feel these difficulties.”