Senate approves Lula government’s main bet to increase revenue

The Senate approved this Wednesday (20) the conversion into law of provisional measure (MP) 1,185/2023, which defines new rules for the taxation of companies benefiting from subsidies and for the use of Interest on Equity (JCP). The voting score was 48 votes in favor and 22 against. The initiative is one of the priorities of the Lula government’s economic team to increase revenue. The senators rejected the highlight presented in PL. Now, the text goes to presidential sanction.

Initial estimates indicated that changes to the rule could generate R$35 billion in additional revenue in 2024, which would help with the challenge of closing public accounts in balance and meeting the fiscal target. Last week, the rapporteur on the joint Congress committee, deputy Luiz Fernando Faria (PSD-MG), “dehydrated” the text of the MP presented by the government.

Even with the changes, the Minister of Finance, Fernando Haddad, said that the estimated revenue remains at R$35 billion. Regarding the change in the JCP rule, the minister stated that he will take “administrative measures” to compensate for the loss of revenue.

The approved project provides that companies must prove the appropriate use of the subsidy and credit to obtain the benefit of tax exemption. As a result, subsidies granted by the Union, states or municipalities, such as those in relation to ICMS, must be included in the calculation basis of taxes such as the Corporate Income Tax (IRPJ), the Social Contribution on Net Profit ( CSLL), PIS and Cofins, informed the Chamber Agency.

Faria also increased the maximum discount that can be given to companies in negotiations for amounts not collected in recent years to 80%. The Ministry of Finance had proposed a reduction of up to 65% during negotiations with Congress to unlock the vote on the MP.

The proposal also proposes changes to Interest on Own Capital (JCP), used by companies to reduce the IRPJ and CSLL tax base, generating less revenue for the Union. The text maintains the possibility of deduction, but limits what can be considered for JCP purposes.

Therefore, only resources referring to the paid-in share capital (transferred to the company’s activities), capital and profit reserves provided for by the law on Joint Stock Companies (SAs), in addition to treasury shares may form part of the remuneration that supports JCP expenses. and the amount referring to the recorded profit.

MP discussion in the Senate

The discussion of the project took place in the deliberative session held on Tuesday (19). Senator Vanderlan Cardoso (PSD-GO) stated that the proposal could be “a shot in the foot” and will contribute to “legal uncertainty” in the business sector. “It’s not fair for the state to give up revenue and the Union wants to take 43% of that revenue… I don’t see MP 1,185/2023 as a solution to the cash deficit [do governo federal] next year,” he said.

The rapporteur, senator Rogério Carvalho (PT-SE), denied that the proposal would remove tax incentives or increase taxes. Senator Marcelo Castro (MDB-PI) pointed out that the proposal is important for balancing public accounts.

The Minister of Agriculture, Senator Carlos Fávaro (PSD-MS), recalled that the exemption for companies was judicialized and that the Superior Court of Justice (STJ) has already formed a majority to authorize the taxation of IRPJ and CSLL on ICMS tax incentives. Fávaro was temporarily removed from office to participate in votes of interest to the government in Congress.

Senator Marcos Rogério (PL-RO) criticized the text presented by the government. He stated that the MP will make “industrial activity more expensive” and will “discourage the permanence” of companies in “states with a precarious logistical structure and far from the main consumer markets”.