Tax Reform: impact on prices depends on deadlines – 10/11/2023 – Market

Companies’ biggest concern with the Tax Reform should not be the change in the burden per sector, but the speed of refunding taxes paid when purchasing inputs and services, which may require more working capital and impact the financial cost of various sectors. .

This is the assessment of the consultancy Becomex, which has among its clients large agribusiness companies and car manufacturers operating in the country.

Strategies that reduce the accumulation of tax credits, such as the use of customs regimes, should also be on companies’ radar, according to the consultancy.

Under the new system provided for in the reform, taxes paid on inputs and services provided to a company will be recovered later. The government talks about a period of up to 60 days and also a real-time refund system, the so-called “split payment”.

“I look at the chain as a whole, and we see this risk linked to the speed of returning these credits. This dynamic needs to happen in a very agile way so as not to burden the segments”, says Vinicius Pacheco, director of the Agribusiness segment at Becomex.

Simulation carried out by the consultancy for a fertilizer industry, which will see a 60% reduction in the general rate of new taxes — estimated by the government at 25.45% —, shows an increase in the tax actually paid by 7.5% or 21%, depending on the company’s location in the country. The need for capital to pay taxes, which will later be returned, would increase by 27.5%.

The simulations regarding the need for working capital and credit accumulation also apply to industry segments, such as the automotive industry, and other sectors.

The consultancy assesses that focusing on greater reductions in the nominal rate may not solve the problem. The exceptions will be compensated by increasing new taxes for other companies that are in the same production chain, such as services provided to agriculture or goods purchased by producers – which could further increase the accumulation of credit to be recovered.

“Often you are asking for a benefit that will result in an increase in the tax rate [geral]. They are already talking about 28%, 30%. Soon, the reduction will not have the expected effect, because they are looking too closely at the nominal rate. I have to understand the effective tax rate of the business”, says Maurício de Moura, director of Innovation for Agribusiness at Becomex.

According to the executive, the speed of return of credits accumulated in the new tax system will be decisive in defining the impact of the Tax Reform on product prices. This factor must be even more important than the variation in the tax burden. A return period much longer than 30 days, he states, would already have an impact on prices.

“Will there be an increase in the tax burden in the agro segment? An increase that generates costs, no. An increase that generates the need for working capital, yes”, says Moura.

The problem of credit accumulation tends to be greater in segments focused on foreign trade, as exports will be exempt from taxes in the new system, with the total refund of new taxes (federal CBS and IBS from states and municipalities) when operating with another country.

This, in fact, is already a problem with the current tax system for exporting companies. Hence the need to also resolve the issue of credits accumulated in taxes that will be extinguished, such as PIS/Cofins and IPI.

According to the version approved by the Chamber, only the return of ICMS has a defined deadline.