Tax reform rapporteur in the Chamber defends using cashback and suppressing extended basic basket

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Extended basic food basket was created by the Senate and covers more food, with a 60% reduction in the rate. Chamber rapporteur defends deleting excerpt and using cashback for items. The rapporteur of the tax reform in the Chamber of Deputies, deputy Aguinaldo Ribeiro (PP-PB), defended removing the extended basic basket, created by the Senate, from the text of the proposed amendment to the Constitution (PEC). The statement was made this Monday (11), at the door of the Ministry of Finance. The proposal approved by the Chamber in July provided for tax exemption for a national basic food basket. It also provided for the possibility of cashback (i.e., refund of part of the taxes paid) for other products outside the basket and that were important for the most vulnerable population. These products and the target audience would still be defined in a complementary law, after the approval of the tax reform. In the Senate, in November, the text by rapporteur Eduardo Braga (MDB-AM) maintained the exemption for the national basic basket and created an extended basic basket, with a 60% lower tax rate for these included items. In addition, Braga established cashback for products in the extended basic basket. Impacts of Tax Reform on food prices What Aguinaldo wants, now, is to return to his original idea. The rapporteur in the Chamber understands that an extended basic basket would create a problem of covering many products — which, according to him, is one of the bottlenecks of the current system — and not achieving the objective of benefiting the most vulnerable population. “Our understanding is that having an expanded basic basket is having the basic basket that we have today, a basic basket that in PIS/Cofins has 1,700 items. And that, in my point of view, we can solve this with cashback — already placed in the Chamber’s own text”, said Ribeiro after a meeting with minister Fernando Haddad. However, change depends on discussion at the leaders’ meeting. “I repeat, this debate will also be decided by the leaders of the House. Our limitation now will be politics,” he declared. Aguinaldo gave as an example the inclusion of mandatory cashback for cooking gas and electricity, a change made by Braga. For the deputy, it is enough that these items are included in future cashback for the poor population. “If I’m doing a cashback for gas and I’m doing a cashback for energy, other consumer products can also be treated with the cashback. And I think we’ll have a structured cashback meeting this type of demand from the population,” he said. National Basic Food Basket Before the approval of the text of the tax reform by the Chamber, in July, critics of the proposal began to suggest that there was a possibility of an increase in the prices of the items that make up the basic food basket with the new taxes. With the repercussion of the matter, the reform rapporteur included the creation of a national basic food basket with tax exemption. Under the proposal, the rates provided for federal, state and municipal VAT will be reduced to zero for these products. But the question touches on another topic: what are the items in a Brazilian’s basic food basket? There is no definitive answer, at least for now. Today, natural foods (such as fruits, meats and vegetables) or low-processed foods (such as cheeses, yogurts and bread) and some hygiene and cleaning products are already exempt from federal taxes (PIS, Cofins and, for industrialized products, IPI). Each state, however, defines an ICMS rate for each of these categories. These rates are zero for some products in some states, but can reach up to 33% according to a survey by the Brazilian Association of Supermarkets (Abras). According to the text approved by the Chamber, it will be up to a complementary law to define which “products intended for human consumption” will be part of the basket. Extended basic food basket In October, Senator Eduardo Braga (MDB-AM), rapporteur of the reform in the Senate, announced that he had made changes to the basic food basket proposal approved in the Chamber in July. On that occasion, he maintained the national basic food basket in the newsroom, with zero taxation, and also included a new concept — the so-called “extended basic food basket”. In this case, the products included there will have a 60% reduction in the tax rate. The senator also maintained the possibility of future creation, through a complementary law, of the so-called “cashback”. The mechanism provides for the return of taxes to a specific public with the aim of reducing income inequalities. In the text, however, Braga added that the return will be mandatory in the supply of electricity to this portion of the population. “Cashback” will also be mandatory for the purchase of cooking gas. The text of the PEC was approved in the Senate in November and is now returning to the Chamber.

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