Tax reform must have a lock against load increase – 06/30/2023 – Market

Rapporteur of the tax reform in the Chamber, deputy Aguinaldo Ribeiro (PP-PB) said that he is studying changes in the proposal to be voted on next week. One change to be made is to make it clear in the text that the new system will have a lock to prevent an increase in the tax burden in the country.

“In our assessment, indeed [já] there is a lock on the issue of increased load in the text that is published. That’s why I’m talking about adjustment of legislative technique. Maybe we need to make this clearer from the point of view of text, because since 2019 my concern is not to have an increase in the tax burden”, said Aguinaldo in an interview with Sheet.

Another point under evaluation is the creation of a council made up of states and municipalities to manage the collection of taxes resulting from the reform. The governors of São Paulo, Tarcísio de Freitas (Republicans), of Rio de Janeiro, Cláudio Castro (PL), and of Goiás, Ronaldo Caiado (União Brasil), criticize the model.

For the rapporteur, the governors’ meetings with the benches at the end of this week and beginning of the next will serve to mitigate doubts and build a solution for the debate.

“The expectation is that from this construction we can actually have a mobilization of everyone, not only from the South and Southeast, but also from the Northeast, from the North, so that we can actually approve the reform”, declared the deputy , ally of the mayor, Arthur Lira (PP-AL).

What is non-negotiable in tax reform?
A text that brings the principles we are building for the adoption of an IVA [Imposto sobre Valor Agregado, a ser criado a partir da fusão de outros tributos]: simplification, transparency, legal certainty, full non-cumulativeness, broad use of credits. These are points that, if removed, end up compromising the tax itself. It loses its meaning.

What points still need to be clarified in the text? There is, for example, a reduced rate for some activities. The text says that the activities listed “could” be achieved, but sectors ask that the text say that they “will” be achieved.
Yes, the story of “may”, “will be”. No one would put those specific goods and services there if they weren’t actually to be included in that treatment. But we are reviewing. We live in a country where everything ends up becoming a dispute, everything is controversial being taken to court. [Então] It is important that we have this clearly.

There is a general fear of an increase in the tax burden. Why wasn’t a kind of trigger included to avoid this and adjust the rate of the new taxes?
The lock on the tax burden is another interpretation that is being given, but in the opinion of our consulting technicians, in the text we are addressing it this way, locking [a carga]. This is a debate that we are having internally, since this was raised.

To embed in the text?
In our opinion, there is indeed a problem with the issue of increasing the load in the published text. That’s why I’m talking about adjustment of legislative technique. Maybe we need to make this clearer from the point of view of text, because since 2019 my concern is not having an increase in the tax burden.

Is the redistribution of load between sectors inevitable?
That’s the rupture of this logic, we don’t have a sector anymore. With VAT, you tax consumption, you tax everyone. So much so that when we deal in the text, even with base reductions, we no longer deal with the sector. It deals with service or product of health, education. It has to be very explicit in this context. It has a whole consumption chain, and there will be a leveling of these rates that will be technically calculated — it is addressed in the text how this calculation will be done.

Mr. gave as an example a 25% VAT. It will still be calculated. But can you have an idea if it will stay above 25% or below?
We have been asking the Revenue for data, which is also asking for the other entities. I still haven’t received the data to say if it’s going to be this or that. What I am always saying is that VAT is a result of the current charge that we pay and is charged from within.

Could the lack of a predetermined fixed number hinder the voting?
No. Even because, in the Constitution, there would not be a rate.

And what about the sectoral lobby?
It has always existed and will continue to exist, it is legitimate. We, as a society, have to think about the following: with VAT, the more exceptions you make, you will increase the burden for everyone. That’s the logic. We already have an exception regime today, our regime [tributário] that was a bit. It’s a mess. Even in the Union you have many rates and benefits. In the states, rates and benefits are nths. And even in municipalities.

Considering those already in the text, is the number of exceptions for a VAT system within reason?
I think we adopted the principles that exist today in countries with the best VATs. Is it the ideal world? No. The ideal model would be a single broad-based VAT, where you could tax all consumption and reduce the rate for everyone. We had to walk to adapt to this reality. But I think that in this adaptation we are looking at our reality, which is not burdening certain sectors that are important to the consumer, especially those that need it most.

The federative council has generated noise, with some states —like São Paulo and For— if placed contrary to this structure, although Comsefaz [comitê de secretários estaduais da Fazenda] have a majority in favor of this model. How will this stalemate be resolved?
There was a consensus last year, but with the election, the command of the states changed. In the suggestion that had been built with Comsefaz itself and the states over the last four years, we had this model that was addressed, but that [agora] there is this divergence. Comsefaz deepened trying to mitigate this internal issue and we are waiting, which was a political commitment, including together with President Arthur Lira, that we built based on a discussion a solution to the issue of the Federative Council, which would be a concern expressed by some governors. They are working on this suggestion, which brings this solution of not compromising VAT, but also of meeting these demands that would end up bringing about a convergence of all states.

Should the solution also resolve any issues that may appear in the Senate vote?
I think the solution is coming from the federation, and we are going to adopt it. It is obvious that I am speaking here without being aware of the idea, but we have a political commitment to listen, discuss and build this solution together. I also have to take municipalities into account, because, after all, we are dealing with the federative council, which is made up of municipalities and states. I felt that the solution that will be presented to me is a solution that comes in the direction of exactly mediating this obstacle.

Specialists and sectors are afraid that this could compromise pillars of the reform, such as the non-cumulative nature of credits. How to reconcile the pillars and interests of the states?
In my conversation with Governor Tarcísio, he told me that he would bring this solution and that this solution contemplates exactly that, not compromising the pillars of the reform, but that it also meets the demand of the states that have shown this concern. So we have to wait for the next few days. But the willingness I saw from Governor Tarcísio, even to do justice to him, was in the sense of cooperating to vote for reform and even vote quickly. I felt in him the willingness to bring a suggestion that is a solution for the whole. He said that São Paulo is believing in the effects of the reform, is believing that the country can no longer wait for a reform. It will not have been good or bad in a country that always has difficulties. Everyone will be in the same boat, in the same situation of being in a country that is going through a bad time, and that could get worse. There is no way for Brazil to waste more time on this topic.

There is a survey that shows São Paulo as the country that can lose the most resources.
For this we have a lock, which we can call “loss insurance”. As these are studies, we are projecting and this impact is also mitigated in the transition, because when you have a transition, as is being proposed, it greatly reduces the loss. And, over time, you start to reduce or even reverse this logic, because then, with the reform, everyone will win because Brazil grows more. And with simplification, you have two things, there is an increase in revenue due to simplification itself and there is an increase in formalization. It is a disincentive to evasion and brings an important contingent to the formal economy.

Governor Tarcísio is due to gather the parliamentary group of São Paulo this Sunday to discuss the reform. What is expected from this meeting?
In addition to this meeting, there is a meeting on Tuesday (4) between governors of the South and Southeast, in Brasília. The intention is for us to evolve in this willingness to collaborate in order to have approval next week. The expectation is that after this construction, we can really mobilize everyone, not only from the South and Southeast, but also from the Northeast, from the North, so that we can actually approve the reform.

There is a very long transition in the ICMS issue to accommodate the issue of tax benefits. VAT would start in 2029, but there is a proposal from the states to start even later, in 2033. As Mr. see this proposal? Is there a chance of being incorporated into the PEC?
We are evaluating. I have a meeting today [sexta-feira] to address this topic to see what the impact is. They proposed a transition starting now with 1% along with CBS [Contribuição sobre Bens e Serviços, a ser criada a partir da fusão de outros tributos] and reaching 2033, remaining stagnant at 1%. And from 2033 have the remainder [da reforma] incorporated. To some extent this mitigates the issue of validation. But you have to analyze the impact. So maybe we can think of a solution that can calibrate. Not having a stagnant percentage, but having a ladder where you can also walk to this “phase out” [eliminação gradual] of benefits and having a balance. Of course, we will have to talk to the Union too to build with [o Ministério da] Farm this way.

Is the text to be voted on a text from the Chamber, mainly from the rapporteur and the president of the House, or is it a proposal from the government?
It is a text from the Parliament that is being constructed with the whole of Brazilian society and with the federated entities. I think the government got that right. We don’t have a government reform, we don’t have a reform of the right or the left, or the center. We have a reform in Brazil, which was proposed by the Brazilian Parliament and is having the collaboration of all federal entities, including the Union, and sectors.

Will the left, President Lula’s base, vote in favor of the reform?
This is a reform that has no ideological bias. It has principles that belong to the Brazilian State.

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Aguinaldo Ribeiro (PP-PB), 54

He has been a federal deputy since 2011. Administrator, trained in business management and engineering, he was Minister of Cities under former President Dilma Rousseff (PT) and leader of the government in the Chamber during the administration of former President Michel Temer (MDB). He is the rapporteur for the tax reform.