Tax Reform talks about the environment and exempts pesticides – 09/09/2023 – Market

The Tax Reform proposal currently being processed in Congress mentions the expression “environment” four times, used as a principle for granting incentives and developing tax policies, but without there being an obligation for such guidance to be observed.

On the other hand, products that can be considered harmful to the environment, such as pesticides, are among those that can have taxation reduced by at least 60%.

Due to a last-minute change made to the proposal on the day of the vote in the Chamber, these inputs must also be protected from the Selective Tax, which aims precisely to tax the production, sale or import of goods and services that are harmful to health or the environment. .

The same can happen with ultra-processed foods.

In the study in which it calculated the rate of new taxes on consumption created by the reform, the Ministry of Finance considered a Selective Tax that only applies to tobacco and alcoholic beverages. The most conservative calculation of this collection was justified by uncertainties about the scope of this new tax.

Once the changes to the Constitution currently being discussed are approved, it will be up to the government to propose to Congress a list of products that benefit twice. Among them, items classified as “agricultural and aquaculture inputs and food intended for human consumption”.

Datafolha research commissioned by ACT Promoção da Saúde showed that 94% of Brazilians support increasing taxes on products harmful to health and the environment. Support is 64% when it comes to pesticides and 36% in relation to fossil fuels.

“It is difficult to think of a Selective Tax on products with negative externalities for the environment and health without having, within the scope of this new tax, pesticides. This is clearly outside this wording that was already left in the Constitution”, says Jefferson Nascimento, coordinator of Social and Economic Justice at Oxfam Brasil.

Nascimento says he disagrees with the justification that it is necessary to exempt all agricultural inputs to guarantee tax-free food and defends a debate on each of these products within the idea of ​​a green tax reform.

“We didn’t even wait to have this debate within the scope of the complementary law. They already put it in the Constitution and closed the doors to this discussion.”

Virgínia Pillekamp, ​​partner in the Tax area at EY, states that the reform provisions that deal with the Selective Tax generate doubts in interpretation and conflicts that could result in challenges later on.

“If agricultural pesticides are excepted [do benefícios fiscal]we will see this discussion in the future, whether the complementary law would have the power to make this type of exclusion”, says Pillekamp.

The tax expert states that the PEC provides that the selection may apply to petroleum derivatives, fuels and minerals, but also to electrical energy, without providing for exceptions for renewable sources, and telecommunications services, which do not fall under the concept of harmful to health and to the environment.

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What the PEC says about food and agricultural pesticides

Ҥ 1 Complementary law will define transactions with goods or services on which the tax rates referred to in the caput will be reduced by 60%, referring to:

(…) VII – agricultural and aquaculture inputs, food intended for human consumption and personal hygiene products.”

“The tax [seletivo] (…) will not apply to goods or services whose rates are reduced under the terms of § 1”.

Source: PEC 45/2019

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Renata Elaine Ricetti, postgraduate coordinator at Escola Paulista de Direito, says that the wording of the reform at this point (article 9) has become confusing.

“They hypothesized that the Selective Tax would tax these consumptions that are harmful to health, but they also stated that it cannot tax food intended for human consumption. So how are we going to tax sugary drinks and processed foods? It’s all very confusing,” he says.

Ralph Melles Sticca, coordinator of the law course at Harven Agribusiness School and specialist in tax law, states that it is necessary to remove selective taxation on goods and services that will have reduced rates from other taxes, for this exemption to be effective.

He says he sees no problems with the writing of the article and believes that some foods could have an unreduced rate and additional taxation. “If you decide that some foods will not have a tax reduction, others, such as ultra-processed foods and soft drinks, could be subject to the application of the Selective Tax.”

Environment

In relation to environmental protection as principles of the tax system and the granting of regional incentives, Oxfam Brasil evaluates the indication as positive, but says that it is necessary to address the issue in more detail when regulating the reform.

These points were included in the text at the suggestion of Congresswoman Tabata Amaral (PSB-SP), who was part of the working group that analyzed the reform in the Chamber.

In March, Oxfam Brasil and more than 70 civil society organizations released the Manifesto for Tax Reform 3S: Healthy, Solidarity and Sustainable. In the entity’s assessment, the current text of the proposal does not fully meet these criteria.

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What Tax Reform says about the environment

• “Whenever possible, the granting of regional incentives (…) will consider preservation of the environment“
• “The National Tax System must observe the principles of simplicity, transparency, tax justice and balance and environmental protection“
• “In the application of the resources referred to in the caput [Fundo Nacional de Desenvolvimento Regional]the states and the Federal District will prioritize projects that provide environmental preservation actions“
• “The Union is responsible for imposing taxes on: (…) production, commercialization or import of goods and services harmful to health or environmentunder the law”

Source: PEC 45/2019

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