Tax framework: Chamber concludes vote – 05/24/2023 – Market

The plenary of the Chamber of Deputies concluded this Wednesday (24) the vote on the new fiscal framework, guaranteeing victory to the government of Luiz Inácio Lula da Silva (PT).

The basic text of the bill was approved on Tuesday night (23) by 372 votes to 108. The deputies rejected all highlights (suggestions for modifying the text) this Wednesday (24). Now, the proposal goes to the Senate.

If approved by Congress, the new fiscal framework will replace the current spending ceiling, a rule that limits spending growth to inflation and is still in effect, although it has been circumvented in recent years.

In total, five proposals for changes to the project approved on Tuesday night were presented: one from the PSOL-Rede federation and the others from the PL, Lula’s opposition party.

The government and the mayor, Arthur Lira (PP-AL), acted to prevent one of the main points of the proposal from being overthrown this Wednesday.

The PL suggested that article 15 of the bill be deleted from the approved text. If that happened, the government would no longer have around R$20 billion to spend in 2024, in an optimistic projection by Chamber technicians, in an election year.

This device was the subject of controversy and had to be changed by the rapporteur, deputy Cláudio Cajado (PP-BA), on the eve of the vote on the framework, on Tuesday (23). 2024 at the 2.5% ceiling. The passage, however, was seen as a maneuver to spend more, which led the rapporteur to change the text on the eve of the vote.

This and another change (focused on the inflation used to correct the limit) would, together, result in an extra space of up to R$82 billion. The number was contested by Cajado, but the rapporteur ended up being pressured to adjust the text.

“We are going to make a mix between what was in the original text and a possibility. The original text predicted growth of 1.12% by the calculations that the government itself provided”, said Cajado after a meeting with leaders to seal the agreement, still on Tuesday. -Friday (23).

“[O governo] It will be able to use, rather than grow, between 2023 and 2024, up to 70% within the limit of 2.5%. It was a compromise to clear up that misunderstanding that the report was putting BRL 80 billion, BRL 42 billion [de gasto extra]”, he stated.

Cajado’s opinion predicts that the 2024 LOA (Annual Budget Law) will be prepared under the rule of 70% of the increase in revenues in 12 months until June 2023, but the government may make an adjustment next year, based on the expected real revenue growth in 2024.

The text approved by the deputies authorizes the government to calculate, in May 2024 (when the government releases the second bimonthly assessment of the Budget), an estimate of the real increase in revenue in relation to 2023 and to apply the proportion of 70%. If this results in a number greater than the one that corrected the spending limit, the economic team can open new credits in an equivalent amount.

In practice, the new version allows the extra collection in 2024 to make room for more spending next year.

Deputies from the PL and União Brasil contested the inclusion of this item, on the grounds that it would make life easier for the government by expanding the possibility of spending in the middle of an election year.

The leader of the government, José Guimarães (PT-CE), spent the day making arrangements to prevent this device from being suppressed.

After a series of conversations throughout the day, the text was maintained with the support of 306 deputies, 49 more than necessary for the highlight to be rejected. As it was a suggestion to suppress an item approved the day before, it would be up to the government to ensure that there were 257 votes to keep the text unchanged.

Another 170 deputies, including members of the União Brasil, which holds ministries in the government, voted to overturn article 15.

Another highlight that was rejected proposed that the Constitutional Fund of the DF be outside the scope of the new fiscal framework. Parliamentarians argued that the Federal District would lose revenue and be left with little money for public security, for example.

“This text leaves the public security of the federal district scrapped”, complained the deputy Alberto Fraga (PL-DF). Still, the highlight ended up being rejected.

Another proposed change sought to remove from the bill an item that rejects the possibility of punishing public managers through the Fiscal Responsibility Law, which can lead to impeachment proceedings for non-compliance with the fiscal framework.

The last highlight suggested incorporating an amendment into the text with the provision that, should the government increase the tax burden from this year onwards, the excess amount collected by the Union would be used to pay the public debt. The proposal was presented by deputies Eduardo Bolsonaro (PL-SP), Luiz Philippe de Orleans e Bragança, Altineu Côrtes (PL-RJ), bench leader, and Kim Kataguiri (União-SP). This highlight was also rejected.

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PROCESSING

What happens now, with the approval of the text by the Chamber?

The text goes to the Senate. If there are no changes, the text goes to the presidential sanction.

However, if the senators make changes to the text, the project returns to the Chamber, which will have the final word — the deputies can accept the senators’ changes or restore the text originally approved by the Chamber. In this case, after the new vote, the text is sent to the President of the Republic for sanction.

What does it take for the proposal to pass Congress?

Complementary bills require an absolute majority of favorable votes, that is, more than half of the members of each House. That means at least 257 votes in the House and 41 votes in the Senate.

Once approved by Congress, what happens to the proposal?

The Chief Executive has 15 working days to sanction the project in its entirety or with partial vetoes in some devices, or even veto it entirely. All vetoes undergo further validation by Congress, which can overturn them with an absolute majority of deputies (257) and senators (41).