Tax framework will go through Senate committee – 05/30/2023 – Market

The president of the Senate, Rodrigo Pacheco (PSD-MG), said this Tuesday (30) that the proposal for a new fiscal framework will be analyzed by the CAE (Economic Affairs Committee) of the House before being voted on in plenary.

The rite adopted by Pacheco will increase the deadline for discussions on the subject in relation to what happened in the Chamber, with the decision of President Arthur Lira (PP-AL) to take the discussion directly to the plenary.

“The complementary bill will be forwarded to the Economic Affairs Commission, the rapporteur will be Senator Omar Aziz (PSD-AM),” Pacheco told journalists. “[A CAE] It will debate this matter, eventually it can hold public hearings on this topic and, as soon as it arrives in plenary, we will treat it as a priority”.

Pacheco also stated that Finance Minister Fernando Haddad will participate on Thursday (1st) in a meeting with Senate party leaders to present the new fiscal framework and detail the changes made by the Chamber.

“During June, if it stays for the penultimate or last week of June, there is no loss. The important thing is that this semester we can deliver the new fiscal regime for Brazil, which will be very well received by society and by the market for the economic development of our country”, he concluded.

The Chamber concluded last week the approval of the new fiscal framework, guaranteeing victory to the Lula government (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) on Wednesday (24). Now, the proposal will be analyzed by the senators.

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.

According to the proposed rule, the increase in the spending limit for the following year must be equivalent to 70% of the variation in revenue in the 12 months accumulated up to June of the previous year, already discounting inflation, provided that the interval from 0.6% to 2 is respected. 5%. In practice, these are the floor and ceiling for advancing expenses, regardless of the country’s economic situation.

In addition, the government needs to seek a primary result target, which is obtained from the difference between revenues and expenditures. The government says it is seeking a deficit of 0.5% of GDP (Gross Domestic Product) this year and intends to reach a surplus of 1% of GDP in 2026.

If the target is not met, the proportion of increase in expenses in relation to revenue drops to 50%, until the trajectory of results within expectations is resumed.

The executive secretary of the Ministry of Finance, Gabriel Galípolo, said this Tuesday that he believes that the debate on the possibility of the new fiscal framework allowing for extra spending comes from a lack of understanding of the project on the part of some analysts.

“The truth is that the way the rule is, it is much tighter than it seems. The issue we are going to face is another, is whether we are willing to squeeze education, health, priority issues in our country”, he evaluated in a live promoted by the newspapers O Globo and Valor Econômico this Tuesday (30).

The origin of the discussion is in the rule included in the framework by the Chamber whose wording, in the interpretation of some economists, opens a gap for the Lula government to have a higher expenditure in 2024.

For Gallipolo, the problem is of the reverse order. “Tight and challenging is this Budget,” he said.

“Our difficulty will be how challenging it will be from 2023 to 2024 to make the necessary repairs in several fundamental sectors”, he added.

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PROCESSING

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

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).