Tax reform still faces resistance – 06/06/2023 – What tax is this

The tax reform proposal presented this Tuesday (6) in the Chamber of Deputies still displeases the service sector and the richest municipalities in the country. The first assesses that he will pay more taxes. The second, which will lose revenue.

The theme is also not a consensus among governors and faces opposition from representatives of the tax administration in some regions of the country.

Politically, it is still necessary to gain support on two other fronts: parliamentarians linked to agribusiness and the Manaus Free Trade Zone. Different treatment was guaranteed to these segments, but the format of the benefit is still a matter of debate.

Even the sectors classified as exceptions —construction/real estate, financial services, insurance, cooperatives and fuel— are waiting to see the size of their benefit.

As with other important topics in the political and economic debate in the country, discussions on the reform of the five main taxes on consumption also suffer from misinformation, opportunism and even denialism – the resistance of parliamentarians and Bolsonarist businessmen is no coincidence.

There are, however, doubts and legitimate demands. In theory, Brazil already has taxes on consumption that should not be cumulative nor contain so many exceptions, such as the ICMS of the states. But the system that was built and patched over the years created a structure completely foreign to that in force in other countries.

Concentrating taxation on the place of origin and not on the destination, differentiating goods and services when defining the rules and not allowing all inputs to generate credit are some of the most outstanding problems.

To survive, companies fight for benefits, states and municipalities promote tax wars and companies and service providers are protected in regimes such as Simples.

In this scenario, many do not believe that the new system will work in Brazil — although it works in 170 other countries. Others estimate that they will not survive the redistribution of the tax burden. Studies that show that everyone will gain from reform are viewed with skepticism. For others, the possibility that some earn more than others is the biggest problem.

The general guidelines of the new reform proposal, presented this Tuesday, are not the “pure system” defended by its creators, but attack the main problems. It remains to be seen how many concessions will be made before the vote on the text, scheduled for the first week of July.

The more than 35 years of discussions about the reform and the countless proposals abandoned in Congress are the main argument of those who do not believe that “now it will”.

The ideas are still alive of approving just a “simplification”, which maintains the foundations of the current system, materialized in the “counter-reform” proposal named Simplifica Já, or exchanging everything that is there for a new CPMF to tax consumption.

The support of the federal government, which created a special secretariat to deal with the issue, and the presidents of the Chamber and Senate is a sign that something will be approved. Whether you can call the changes the Reformation (with a capital r) is another story.

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