Tax framework advances in the Senate – 06/21/2023 – Market

The Senate Economic Affairs Committee approved, this Wednesday morning (21), the basic text of the new fiscal framework.

The commission confirmed the removal of the (Fund for the Maintenance and Development of Basic Education) and the FCDF (Constitutional Fund of the Federal District) from the spending ceiling, in addition to spending on science, technology and innovation.

These changes meant that, on Tuesday (20), when the rapporteur Omar Azis (PSD-AM) presented his report, members of the opposition such as Rogério Marinho (PL-RN) and Tereza Cristina (PP-MS) asked to see and postpone the vote to this Wednesday.

Names like Marinho, now leader of the opposition in the Senate, and Ciro Nogueira (PP-PI), Bolsonaro’s former minister, criticized the text and called for amendments and highlights to be approved. Aziz, however, did not heed the claims.

The theme is scheduled to go to the plenary this Wednesday and, if approved, it will have to return to the Chamber of Deputies, since changes were made to the proposals.

Unlike the negotiations involving Fundeb and FCDF, the exclusion of expenses with science, technology and innovation from the limit imposed by the new fiscal rule was not previously discussed with the Chamber, according to deputy and rapporteur Cláudio Cajado (PP-BA).

In the Senate, there is recognition of the risk of deputies overturning this point in the Chamber or of the government itself vetoing the section referring to the expansion of the list of exceptions for expenses.

Aziz also accepted, in the report that was approved, the proposal to create the Fiscal Modernization Committee, suggested by Veneziano senator Vital do Rêgo (MDB-PB).

The body will not have a deliberative character and will be composed of representatives of the Ministry of Finance, the Ministry of Planning and Budget, the Chamber of Deputies, the Federal Senate and the TCU (Union Court of Auditors).

The senator, however, ruled out changing the text approved in the Chamber of Deputies regarding the period of inflation to be used to mark out the expenditure limit in the Budget – which could increase the allowance for expenses next year.

REMEMBER THE FRAMEWORK AND ITS CHANGES

What is the framework? Bill under discussion to regulate how federal expenses should grow over the years, replacing the current spending ceiling. According to the text, the increase in expenses will correspond to the inflationary correction plus a real increase of 0.6% to 2.5% each year, a percentage that grows within this range if there is an increase in revenues.

What changed in the framework in the approval in the House? The House reduced the list of exceptions to the spending cap originally proposed by the government. All investments in state-owned companies, transfers to states and municipalities to finance the nursing floor and the FCDF (Constitutional Fund of the Federal District) came under the general rule of Fundeb expenses.

In addition, the Chamber changed the period for verifying the inflation that influences expenses, from the 12 months ending in December of the previous year to the 12 months ending in June of the previous year (which may result in fewer expenses in 2024).

What is being discussed in the Senate? The proposal’s report in the Senate, presented by Omar Aziz, proposes removing Fundeb, transfers to FCDF and expenses with science, technology and innovation from the expenditure limit.

The text also provides for the creation of the Fiscal Modernization Committee, a body that will not have a deliberative character and will be composed of representatives of the Ministry of Finance, the Ministry of Planning and Budget, the Chamber of Deputies, the Federal Senate and the TCU (Tribunal de Contas of the Union).