Tax Reform: rapporteur wants to stop burden increase – 08/22/2023 – Market

In the first public hearing held by the CCJ (Constitution and Justice Commission) of the Senate to discuss the Tax Reform in the Senate, the rapporteur Eduardo Braga (MDB-AM) defended the inclusion of mechanisms in the Constitution to limit the tax power.

He also said that the current tax system cannot remain as it is and that it is necessary to approve the reform.

“There is no econometric guarantee that we will not have an increase in the tax burden if we do not guarantee this in the Constitution. Therefore, I think that we need to have obstacles”, said the senator this Tuesday (22).

“I think that one path could be, this is a contribution to the debate, that we can have neutrality guaranteed by the volume of the tax burden versus the Brazilian GDP.”

The reform provides for the maintenance of the tax burden of taxes on consumption at the same level as the average verified in the period 2013-2022, of 12.45% of GDP (Gross Domestic Product).

At the same public hearing, Bernard Appy, extraordinary secretary for Tax Reform at the Ministry of Finance, stated that the reform maintains the burden, increases the population’s income and has deflationary effects on all prices.

“The fundamental objective of the reform that is now being discussed in the Senate is to correct distortions that harm growth,” he said.

One of the main issues cited by senators was the IBS (Tax on Goods and Services) Federative Council.

Heleno Torres, professor at USP (University of São Paulo), stated that, instead of a council, a collection agency should be established, a model seen in countries such as Argentina, Italy, Spain and Portugal.

“This council must be a collection agency and no more than that. It cannot interfere in fiscal policy, cannot interfere in inspection procedures, therefore, it must not interfere in what is autonomy within the powers of the states”, he stated.

Appy said that the body will work as an agency – the name council was a request from the states themselves – and said that its objective will be to manage an algorithm that will collect and distribute the revenue of the new tax to states and municipalities.

Regarding the discussions on the division of the council’s powers among the entities, the secretary stated that the governance of the Federative Council is a political decision, not a technical one, which is up to Parliament – and not the federal government.

Heleno said he was afraid that the body would become a kind of Confaz, a body in which Finance secretaries participate and which, according to the tax specialist, destroyed the ICMS system in Brazil.

“Confaz is responsible for all the damage caused to the national tax system. Imagine a Confaz with a building, body, power and money. I am very concerned that the council becomes a great Confaz.”

Appy said he agrees with the diagnosis on the treasury body, but said that the council will not have the same powers. “Confaz, in fact, is a disaster, it’s true, precisely because it has the political role of deciding on the tax benefit, which the Federative Council does not do. It is a strictly technical body.”

According to the secretary, this disfunctionality of Confaz is the result of the collection of ICMS at origin. The taxation at destination foreseen in the reform, according to him, does away with this political character that exists today in a body that coordinates the actions of the states.