Tax reform: Report will have three new taxes – 06/03/2023 – Market

The Chamber’s working group that discusses the tax reform scheduled for next Tuesday (6), at 4 pm, the presentation, discussion and vote on the report by Deputy Aguinaldo Ribeiro (PP-PB), who will present a new proposal.

The text will bring the reform guidelines, providing for the replacement of five taxes on consumption by two new ones, one federal and the other for states and municipalities, within the system called Dual IVA (two taxes on added value).

The new wording of the proposal will be presented in June, after discussions with the government, parliamentarians and economic sectors. The idea is to vote on the reform in the Chamber before the parliamentary recess in July.

The new taxes on consumption should have three rates: the standard tax applied to most goods and services, a reduced percentage (the so-called break-even rate) that seeks to balance the tax burden in some situations, and the zero rate.

There will also be a Selective Tax, which ensures additional taxation to discourage the consumption of some products, such as alcoholic beverages.

Adhesion to the new system will be optional for Simples Nacional companies. In this case, the company can choose to collect the tax within the new rules, which is advantageous for those who supply products and services to companies, or remain in the current system, which would be better for those who sell direct to the consumer.

The Manaus Free Trade Zone will be preserved, but other tax benefits will be revised.

There will be differentiated treatment for food, health, education and public transportation. The same applies to credit operations in the financial and insurance system.

The text will also provide for the possibility of a tax refund system to compensate for the end of some benefits (the “people’s cashback”) and a regional development fund to replace the tax war model between states and municipalities.

Exceptions for the agricultural sector are also under discussion. Among them, the exemption of the basic food basket, which can be maintained or replaced by cashback.

On Monday (5), the state finance secretaries plan to present a position regarding the reform. They try to unify the demands regarding the definition of the number of rates, federative transition, collection model, regional development fund and Manaus Free Trade Zone.

For the proposals under analysis in Congress, the new tax on consumption will be charged at the destination, not at the place of production. With this, the collection is in the region where the consumer is, and not at the company’s headquarters, which redistributes the load.

There will be a single legislation across the country for the taxes created by the reform and the end of cascading charging: every taxed input generates credit for the company that purchased it.

The new rates will be calibrated to maintain the tax burden on consumption. The IBS rate is estimated at 25% (average percentage already paid today).

The system known as VAT (Value Added Tax) is used in around 170 countries, including most of Europe and Latin America.

To avoid loss of revenue for states and municipalities, there will be a 40-year transition.

The report can also deal with taxes on property, for example, with the collection of IPVA on water and air vehicles.