Senate Committee approves payroll tax relief; final vote goes to plenary

The Senate’s Economic Affairs Committee (CAE) approved, this Tuesday (24), the project that extends the payroll tax exemption for companies in 17 economic sectors until the end of 2027. An agreement between parliamentarians allowed approval of an urgent request to discuss the proposal in the main plenary of the House, contrary to the expectation that the text would go straight to the sanction of President Luiz Inácio Lula da Silva (PT).

The current exemption model would expire in December this year, but the proposal approved by the CAE provides for the extension for another four years, until December 31, 2027. This will have a significant impact, as it covers companies that directly employ 8.9 million people, in addition to millions of indirect jobs.

The sectors affected by the measure cover both industry and services, including leather, footwear, clothing, information technology, road freight transport, civil construction and others. The president of the Senate, Rodrigo Pacheco (PSD-MG), was in favor of approving the measure.

The rapporteur, senator Angelo Coronel (PSD-BA), rejected all changes made by the Chamber of Deputies during the discussion of the proposal in August. However, he considered and went back on the suggestion to incorporate one of the changes made by the deputies, which would allow the reduction of taxation on public transport companies.

An agreement reached by the original author of the proposal, senator Efraim Filho (União Brasil-PB), led the committee members to approve the rapporteur’s original opinion and take the discussion to the main Senate plenary. In this location, Ciro Nogueira (PP-PI) must stand out for voting separately from the section dealing with public road transport companies.

The intention is to approve the change made by the Chamber, which reduces the social security contribution rate for public road transport companies with fixed itinerary passengers to 1%.

In addition to allowing tax reductions in private companies, the project approved by CAE also reduces the social security contribution rate paid by small municipalities from 20% to 8%. This will apply to cities with less than 142,600 inhabitants that do not receive the reserve quota from the Municipal Participation Fund (FPM).

It is estimated that more than three thousand municipalities will be affected by this measure, resulting in a loss of annual revenue of R$9 billion for the federal government.

Payroll relief allows companies to replace the 20% taxation on employees’ salaries with a lower incidence, from 1% to 4.5% of gross revenue, depending on the service provided. This possibility should be valid until the end of 2027, allowing companies to pay less taxes and hire more employees.