Tax reform is discussed at a meeting at Afocefe

Pedro Carrizo, special for the JC

Tax simplification in Brazil, based on a model aligned with the most advanced economies, which has among its principles uniting taxes on goods and services, has been a decades-long discussion that has regained momentum. So much so that the tax reform agenda once again gains traction in Praça dos Três Poderes, and the economic team rushes to put the reform text to a vote later this year.

The topic was also debated this Thursday (9) by the Union of Tax Technicians of the State Revenue Service, in the 1st edition of the Afocefe Dialogues. Among the speakers, the economist from the Institute of Applied Economic Research (Ipea), Sérgio Gobetti, took part. According to him, the current proposal for tax reform has three types of repercussion: simplification in the public field, the reduction of regressive taxation on consumption, based on the unification of taxes, and the synthesis of state taxes on industrial goods with municipal services.

“Another important change is the adoption of the principle of destination, in the sense that the tax belongs to the place where the person who paid the tax lives. Today, if I buy with a credit card in Porto Alegre, the ISS [Imposto sobre Serviços de Qualquer Natureza] collected in Barueri, where the credit card companies are headquartered”, explains Gobetti

In general terms, the Tax Reform is guided by two PECs that are being processed in Brasília. One is 45/2019, which provides for the replacement of five taxes (the federal PIS, Cofins and IPI, the state ICMS and the municipal ISS) by a tax on goods and services (IBS), with centralized collection and shared management, whose rate would be the same for all goods and services.

The other is PEC 110/2019, which establishes the dual model of Value Added Tax (VAT), which aggregates federal, state and municipal taxes. The idea of ​​the current management is to unite the two proposals in another Amendment.

“The objective is that there is no increase in the tax burden. The VAT will have the same collection as there is today, but it will be distributed in a different way. The idea is that the poor cities have their slice of the cake increased and the rich ones reduced. However, in order not to have a drop in revenue in rich cities, the transition from the current model to the new one will be gradual and will take 40 years”, explains Gobetti, who is an advocate of the current reform model.

A view contrary to that of Gobetti is that of Dão Real, president of the Fiscal Justice Institute, who was also at the Afocefe meeting. According to Real, the unification of taxes tends to simplify compliance with tax obligations for corporate taxpayers, but there is no simplification from the point of view of public administration.

“For example, the IBS, as designed in PEC 45/2019, would allow us to have more than 5,000 different rates in Brazil”, he argues.

This is because, although the proposal defines that the rate is the same for all goods and services, it also allows each municipality to have a different rate after the first 5 years of transition. The IBS rate will be the sum of the rates of states, municipalities and the Union.

According to Real, the neuralgic problem of the tax system is not in its complexity, but in its regressivity, a point that suffers few changes with the Tax Reform debated.

He defends a reform proposal that contemplates the reduction of taxation on consumption, in parallel with the increase of taxation on wealth, the country would be much more able to leverage economic activity.

“What Brazil needs is a tax reform that is more progressive, where the richest pay more taxes than the poorest, as this model enables both social policies and reduction of social inequalities as well as conditions for economic growth”, explains Real

The meeting at Afocefe, broadcast on the entity’s YouTube channel and on Facebook, also included the participation of Livi Gerbase, political advisor at the Institute of Socioeconomic Studies (Inesc) and state deputy Miguel Rossetto.