Tax reform: health, education will have a lower rate – 07/06/2023 – Market

The tax reform rapporteur, deputy Aguinaldo Ribeiro (PP-PB), decided to further reduce the rate of goods and services that will have a favored regime in the new VAT (Value Added Tax) collection system. The measure covers health, education and public transport, among other segments.

Until then, the text provided for the setting of a standard rate —not yet defined, but estimated at around 25%— and a reduced one for these activities, equivalent to 50% of the full charge.

In a new version of the opinion released on Thursday night (6), Ribeiro decided to cut this proportion to 40%.

This means that, under a hypothetical rate of 25%, the items contemplated by the lower charge would collect 10%, instead of 12.5% ​​as would have occurred in the previous version.

“This was the result of an understanding with President Arthur Lira and Minister [Fernando] Haddad”, said Ribeiro when announcing the change in plenary.

The list of goods and services contemplated by the reduction includes medicines, medical devices and health services, education services, public transport, in natura agricultural products and agricultural inputs, food intended for human consumption and personal hygiene products.

On Wednesday (6), the deputy had already expanded this list to include medicines and basic menstrual health care products, as well as medical and accessibility devices for people with disabilities.

This Thursday, he changed the passage that mentioned national artistic and cultural activities to include “national artistic, cultural, journalistic and audiovisual productions”.

The rapporteur also removed the mention of the law that exempted the basic food basket, which expands the range of agricultural inputs that will be covered by the favored rate — in a nod to agribusiness.

Ribeiro even changed a word used in the legal text to give more security to the sectors reached by the reduced rate. Before, the PEC said that the listed segments “may” have a lower charge —which the rapporteur justified as a recommendation of legislative technique. In order to avoid doubts and avoid contrary votes, the passage was replaced on Wednesday by “will be reduced”.

The text also provides that the activities covered by the lower rate cannot be subject to the Selective Tax, which will replace the IPI (Tax on Industrialized Products) and will be focused on activities that are harmful to health and the environment.

The text also maintained the creation of a National Basic Basket, a list of basic products consumed by families and which will have rates reduced to zero.

“[A mudança] It’s so that no one keeps saying that we’re going to weigh the hand on the poor”, said the rapporteur on Wednesday, when reading his opinion. “We want to give a clear signal to all of Brazil that we are doing a serious job.”

The list of goods to be covered by the rate cut still needs to be regulated, but the change meets a demand from different sectors and parliamentarians. In the previous version of the text, the products in the current basic basket would have a 50% discount on taxation, raising fears of an increase in the burden —which was denied by the government and the rapporteur.

The text also provides that specific highly relevant drugs and medical and accessibility devices for people with disabilities may have their rates zeroed by means of a complementary law.

SPECIFIC TREATMENT FOR SECTORS

In a nod to the service sector, the rapporteur also expanded the list of activities that will have specific tax treatment and included hotel services, amusement parks and theme parks, restaurants and regional aviation. These segments may have different rates and their own rules for deducting tax credits.

On Wednesday, Ribeiro had already responded to agribusiness claims by establishing a specific tax regime for cooperatives. The opinion foresees that the credits of the inputs acquired by the cooperative members be used in the sale to non-cooperative members, guaranteeing equality with other companies.

The two regimes are added to a list of other segments that already had differentiated treatment, such as fuels and lubricants, which will have uniform rates charged in a single phase of the chain and the possibility of granting credits to the taxpayer.

Activities operations with real estate, financial services, health care plans and prognostic contests (such as lotteries) will also receive specific treatment, with changes in rates, credit rules and calculation basis, in addition to the possibility of taxation based on the revenue or billing.

The rapporteur also detailed the concept of financial services in the PEC, which includes credit, exchange, insurance, pension, consortium, brokerage operations, among others. According to Ribeiro, the measure seeks to keep bank fees and commissions charged by these institutions within the reach of the standard taxation of IBS and CBS.

The favored regime, which will include transactions, should have defined rates and calculation basis “so as not to increase the cost of credit operations”.

The new text also specifies which operations with real estate will be achieved by the differentiated regime of this activity: construction and real estate development; subdivision of land and disposal of immovable property; leasing and leasing of real estate; and administration and intermediation of real estate.