Tax framework: Chamber approves emergency regime – 05/17/2023 – Market

In a first test of support from parliamentarians for the new fiscal framework presented by the government of Luiz Inácio Lula da Silva (PT), the Chamber of Deputies approved by 367 votes to 102 the urgency of the complementary bill that creates new rules for the management of public Accounts.

The urgency regime is not yet the vote on the merits of the proposal and means, in practice, that the text gains priority in the processing in relation to other projects in progress in the House. The proposal is one of the priorities of the team of the Minister of Finance, Fernando Haddad.

Last Monday (15), government representatives and party leaders agreed that the assessment of the project’s content will take place next week. If approved, the text still needs to go through the Senate.

The rapporteur for the proposal, Deputy Cláudio Cajado (PP-BA), presented his opinion with changes that seek to tighten the rule, such as the inclusion of triggers for adjusting the accounts in case of non-compliance with the goals and the reduction of the list of expenses that will be left out the new spending limit.

Among the triggers is the ban on granting new tax breaks and the adoption of measures that imply readjustment of mandatory spending above inflation.

On the other hand, Cajado shielded some mandatory expenses from the scope of these triggers, such as those linked to the minimum wage.

As shown to Sheet, there was a risk that non-compliance with the target would hinder the minimum wage appreciation policy, which ensures correction of the national floor by inflation plus the GDP (Gross Domestic Product) variation of two years earlier. At Lula’s request, however, the report expressly says that the policy will not be impacted by the triggers.

Lula also asked for protection for expenses with the Bolsa Família program, and Cajado even said that they would be shielded. Today, however, there is no readjustment policy for the benefits of the social program. As a result, in the event of non-compliance with the fiscal target, the following year the Bolsa can only be corrected by inflation.

The rapporteur also decided to grant at the outset a greater expansion of spending in 2024, the first year of validity of the new rule. The limit will grow 2.5% above inflation, the ceiling of the margin established in the fiscal framework (which is 0.6% to 2.5% per year).

Government leader in the Chamber, Deputy José Guimarães (PT-CE) praised the text’s rapporteur and said that he “had a patience the size of Minister Haddad’s patience” to dialogue with all parties.

“Faced with the end of the spending ceiling, we need a new fiscal regime to guarantee stability, to guarantee predictability and regain confidence in Brazil before the world and economic agents,” he said.