Tax reform: text approved by the Chamber brought more exceptions than the ‘desirable’, assesses secretary

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Bernard Appy, extraordinary secretary for reform at the finance ministry, said caveats are a “political cost” of approval. Proposal must be analyzed by the Senate from August. The extraordinary secretary of tax reform at the Ministry of Finance, Bernard Appy, live this Thursday (13). Reproduction/XP Investimentos The extraordinary secretary of tax reform at the Ministry of Finance, Bernard Appy, said this Thursday (13) that the text approved by the Chamber of Deputies came out with “more exceptions” than what was “desirable”. The analysis of the Proposed Amendment to the Constitution (PEC) of the tax reform was concluded in the Chamber last Friday (7). Now, the text will go to the Senate for discussion, which should take place in early August – after the return of the parliamentary recess. “It is true that the text approved in the Chamber came out with more exceptions than would be desirable, than we would like to happen, but that was the political cost of approving the tax reform”, defended Appy. The proposal approved by the deputies expanded the list of goods and services that will have a reduced rate or may be exempt from the collection of new taxes (see below). One of the open points is the definition of the rate of the future Value Added Tax (VAT). The value is not included in the text of the proposal and should only be established later, by means of a complementary law. In view of the changes introduced in the final phase of the procedure in the Chamber, the secretary said that the ministry is updating the calculations of what would be the necessary rate to maintain the current tax burden. Appy again said that the number of exceptions influences the definition of the standard rate. “The more exceptions you have, the higher the rate of other goods and services tends to be to maintain the tax burden, the reform is designed to maintain the tax burden”, he said in a live broadcast promoted by “XP Investimentos”. although, in “reasonable hypotheses”, the estimate is maintained that the rate will be below 30%. The proposal In general, the reform has as its central objective to simplify federal, state and municipal taxes. replaced by two Value Added Taxes (IVAs) — one managed by the Union, and the other with shared management between states and municipalities: ▶️ Contribution on Goods and Services (CBS): with federal management, it will unify IPI, PIS and Cofins ▶️ Tax on Goods and Services (IBS): with shared management between states and municipalities, it will unify ICMS (state) and ISS (municipal) has been criticized by companies and experts. The article provides that “the states and the Federal District may institute a contribution on primary and semi-finished products, produced in their respective territories, for investment in infrastructure and housing works, replacing the contribution to state funds”. December 2043. Tax reform: companies and tax specialists express concern about article included in the proposal Reduced rates and exemptions The proposal also establishes that some goods and services will have reduced rates: education services; health services; medical and accessibility devices for people with disabilities; medicines and basic menstrual health care products; public transport services for passengers by road, rail and water, urban, semi-urban, metropolitan, intercity and interstate; agricultural, aquaculture, fishing, forestry and plant extractive products in natura; agricultural and aquaculture inputs, food for human consumption and personal hygiene products; national artistic, cultural, journalistic and audiovisual productions and sports activities; and goods and services related to national security and sovereignty, information security and cybersecurity. In addition, the PEC also points out that some specific drugs, such as those used for cancer treatment; basic menstrual health care products; medical and accessibility devices for people with disabilities; vegetables, fruits and eggs; 100% reduction in the federal VAT rate (called CBS) levied on higher education education services (Prouni); possibility of an individual or legal rural producer with annual income of up to R$ 3.6 million being “free” from paying future VAT; and the possibility of zeroing VAT on urban rehabilitation activities in historic areas and critical areas for recovery and urban reconversion.

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