Tax Reform: Big Tech asks for a cap on tax hikes – 07/12/2023 – Market

The largest technology and digital retail companies operating in Brazil, represented by camara-e.net (Brazilian Chamber of Digital Economy), welcome the Tax Reform. They want, however, the definition of a ceiling for the increase of taxes on the service sector in the text of the Tributary Reform, in course in Congress.

The entity says in a note that the tax increase limit on services should not create complexities about the structure of the new tax to be created by the Reform, called IVA.

“The replacement of taxes on consumption by VAT, single or dual, which covers both physical and digital goods and services, is a first-rate step towards modernizing the Brazilian tax system and bringing it closer to the best international practices”, defends the entity in a note published on its website.

Market Livre, Quinto Andar, and C6 Bank state that the simplification of the tax system is positive for the country. In addition to camara-e.net, Zetta, a non-profit association founded by Nubank and Market Pago, also stood in favor of changes in the tax system.

Market Livre says that it is contrary to the creation of joint and several liability in the production chain, when a supplier’s debt to the State is charged to a reseller, and vice versa. “In the e-commerce sector, where platforms already share information and cooperate with enforcement, we understand that the current model should be maintained.”

Magalu and Americanas said they would take a stand through the IDV. The Institute for Retail Development (IDV), which includes retailers that operate in marketplaces, declined to comment on the matter.

As for Abott’s (employer of video streaming services), taxation for online content transmission via application should have the same taxation rules as books, considering that this service provides education, entertainment and culture.

“We believe that the government and Congress are interested in guaranteeing universal access to information based on rates consistent with the Brazilian reality”, says the entity in a note.

Platforms, in general, fall into the category of services, they do not sell consumer goods. In a simplified way, Facebook charges to distribute ads, Amazon, as a marketplace, receives it from the seller who wants to advertise on the retail giant’s website, and Uber takes a slice of the amount paid to the driver to put him in contact with the client.

Therefore, these companies are taxed via ISS (Tax on Services, of municipal scope). According to federal law, the rate of this tax can vary from 2% to 5% (municipalities define how much to charge, within this range). They also pay PIS and Cofins, which are calculated directly on revenue, although they are exempt from ICMS (state tax on goods), in accordance with the Kandir Law.

The text approved last Thursday (6) by the Chamber of Deputies provides for the merger of PIS, Cofins and IPI (federal taxes), ICMS (state) and ISS (municipal) into one IVA (Value Added Tax). VAT will be dual, that is, divided into two taxes, one federal and the other for states and municipalities.

The ICMS, by constitutional determination, has a minimum rate of 4%, but the charge can reach 18%. In the dispute to attract companies to their territory, governors grant benefits that can zero the tax collection — it is the so-called tax war.

As the Reform aims to unify the collection generated by the five taxes mentioned in a dual VAT (CBS charged by the federal government and IBS, by the state and municipal spheres), the percentage charged on services and products that enjoyed exemption tends to rise, evaluate the companies .

The Ministry of Finance projects that the service sector, in general, will pay more taxes directly. This value would be transferred directly to the consumer only in the case of benefits between company and customer, such as streaming and marketplaces.

In the case of marketplaces, the collection of ICMS, import tax and other taxes is still surcharged by the ISS —called cumulative tax by specialists.

The holder of Tax Law at the Faculty of Law of USP, Luís Eduardo Schoueri, says that the Tax Reform has the merit of avoiding the collection of tax on tax, from the granting of tax credits. “That goes for the entire chain, including when Facebook buys a computer.”

The Ministry of Finance also argues that the infrastructure sector should be less taxed, which should reduce spending on electricity.

Schoueri, however, claims that it is impossible to know whether there will be more or less taxation in total with the approval of the Reform. This will be defined in the complementary law needed to regulate the new tax system, if PEC 45/2019 is approved in the Senate.

It will be necessary to look beyond the rate, says the tax partner at Pinheiro Neto Advogados, Luiz Roberto Peroba. Even if the tax percentage increases, the credit system proposed with the new VAT will reduce the payment base, which will have an effect on the final amount paid to the State.

The PEC approved by the Chamber of Deputies also creates exemptions for education, health, agribusiness and other sectors. “The more exceptions, the higher the VAT for other areas”, says Schoueri.

Some services, such as hotels, amusement parks and restaurants, will also have different rates, but digital platforms are not included.

Within the technology sector, taxation is also levied in different ways on different services such as digital advertising on social networks, intermediation of sales on marketplaces and digital banks.

In specific cases, social networks do not pay tax on transactions involving Brazilian users. “If tire manufacturer Pirelli, from Italy, buys Facebook ads in the US to advertise them in Brazil, the government does not collect taxes. This is a global discussion.”

Google, Facebook and TikTok, all associated with camera-e.net, were sought by Sheet and chose not to comment. Twitter was also questioned via email, but responded with an automatic message that remains an emoji of feces – the social network has not had press representation in Brazil since Musk bought the platform.

The C6 digital bank says it is represented by the Febraban note, which praised the approval of the Tax Reform. “The worst case scenario would be that we get stuck in the lack of consensus in the search for an ideal reform.”

“The current system is an obstacle to growth: it reduces the productivity of companies, prevents the efficient allocation of resources and generates a level of litigiousness in society unparalleled in other countries, both in developed and in emerging ones comparable to Brazil”, says the note entity.

When contacted, Nubank preferred not to comment on the Tax Reform. A Sheet sought out Zetta, a non-profit association founded by the digital bank and Market Pago. The entity is aligned with Febraban in defending the approval of the reform.

Zetta claims that points regarding financial services need to be detailed in specific regulation — the supplementary law. “Zetta continues to monitor the matter, contributing in a technical way to the discussions and defending the perspective of its associates in what it considers beneficial for consumers.”

Amobitec (Brazilian Association of Mobility and Technology), which represents transport and logistics applications, preferred not to comment on the Tax Reform. Nor did its associates Uber, 99 and iFood.

Members of camara-e.net
99
Adobe
AirBnB
Almeida Corporate Law
amazon
Americanas SA
Arpen-SP
binance
Bitso
Good view
buser
carrefour
Bahia Houses
Certigsign
Coinext
Mail
Take off
dell
Ebanx
Is easy
I got sick
Expedia
Expedia Group
Extra.com.br
Facebook
easily
fenaco
idwall
iFood
Kaboom!
Kwai
Locaweb
Ludovino Lopes Advogados
Magazine Luiza
Free market
Market Pago
Netshoes
Nic.br
nonoc
Nubank
OLX
Payment insurance
Petlove
Cold spot
How much
Fifth floor
rappi
rechargepay
ICP Seguros Network
sebraes
Serasa Experian
Shein
shoptime
soft bank
stone
Submarine
TikTok
trivago
twitter
Uber
UFSC
UOL
By Internet
Visa
whirlpool
Wild Life Studios
wirecard
Yahoo!