Treasury admits changing tax target if alternatives to payroll tax relief fall – 01/06/2024 – Market

The Ministry of Finance admits changing the zero deficit target — defended by minister Fernando Haddad — if all alternatives are exhausted to compensate for the loss of revenue with the extension of the payroll tax exemption until 2027.

To avoid this situation, the economic team defends the gradual reinstatement of the payroll and threatens to go to court if the MP (provisional measure) that deals with the issue is overturned by the National Congress.

If this scenario materializes, and the government of Luiz Inácio Lula da Silva (PT) ends up defeated in the legal dispute, the Treasury will still try another trick: implementing new measures to avoid loss of revenue and reinforce the Union’s cash flow this year.

“If new measures are not possible, eventually you have to change the target, of course. What are you going to do? Magic? You have to overcome the barriers”, says the executive secretary of Finance, Dario Durigan, in his role as acting minister during Haddad’s vacation.

“All measures will be taken for us to close the Budget. If, in fact, what we are presenting does not succeed, there is no alternative: we have to change the target”, he adds.

Durigan denies that the MP is an “affront” to Congress, as Senator Efraim Filho (União Brasil-PB) said after Haddad presented the alternative proposal. He argues that the department had no “opportunity” to debate the issue and was forced to adopt this “totally legitimate” measure before the end of the year because of the principle of annuality.

For number 2 of the Treasury, the act is a “prestige” and “preserves the work” done by the Legislative and Executive last year to advance the economic agenda.

Confident that the MP will not be returned by parliamentarians after the meeting between the president of the Senate, Rodrigo Pacheco (PSD-MG), and the leaders in the coming days, the department wants to use the deadline until April 1st, when the new ones will come into effect. rules, to reach an agreement with Congress.

“The limit of negotiation is fiscal responsibility. It is maintaining the Budget with our target”, says Durigan. He admits that concessions can be made, as long as fiscal balance is maintained.

If there is no agreement, the Treasury is determined to go “all or nothing” and take the issue to court “due to lack of options”. According to the ministry, the payroll tax exemption is unconstitutional as it goes against the Social Security reform, which determines that the contribution base cannot be changed.

The ministry also says that this benefit is anti-budgetary because it is incompatible with the Budget approved for 2024 and because it does not respect the LRF (Fiscal Responsibility Law), in addition to being uneconomic because it is a “bad” public policy and would have failed in its main purpose. objective of stimulating job creation.

According to Durigan, the TCU (Federal Audit Court) has made recommendations to the government questioning how vetoes overturned by Congress that violate the Fiscal Responsibility Law will be handled.

“Let’s do something that is constitutional, that respects the Budget, that respects the Fiscal Responsibility Law and that learns from the past and proposes an effective job maintenance measure. That’s what we’re talking about [ao Congresso]”, says the executive secretary about the re-encumbrance of the payroll.

According to government estimates, the gradual re-encumbrance of the payroll will generate a revenue loss of R$ 5.6 billion, which will be fully compensated by the gradual extinction of Perse (Emergency Program for the Resumption of the Events Sector) with the replacement of R$ 6 billion.

The Treasury also argues that the proposed measure simplifies the methodology of public policy, which in the case of exemption is classified by Durigan as chaotic, by linearizing the benefited sectors.

According to the executive secretary, it is a “half-truth” that the exemption benefits only 17 sectors of the economy, including communication, which includes Grupo Folha, the company that publishes the Sheet.

Durigan argues that, by using the nomenclature that identifies products, companies from more than 400 sectors of the economy have already benefited since the payroll tax exemption was created during the Dilma Rousseff (PT) government in 2011.

The Treasury’s proposal changes the logic of the exemption — the text creates two groups of “economic activities” based on the CNAE (National Classification of Economic Activities) with different taxation.

With the new rule, the employer contribution will be 10% or 15% in the range up to the minimum wage for employees this year and the standard rate of 20% will be applied to the portion that exceeds this amount.

Two criteria were considered for the division of activity groups, according to a study by the SPE (Economic Policy Secretariat) of the Ministry of Finance. The first is the percentage of the wage bill of companies opting for the benefit over the total quantity (opting and non-opting) of each economic division.

The other is the percentage of the current waiver in relation to the total salary of companies also opting for economic division. In this case, the idea is to know how much the company stops paying for the volume of employment it generates in return.

The first group included the activities with the highest participation in the current resignation (above 75%). This is the case, for example, of transport, radio, television and information technology.

For this group, the reduced taxation scale for the first minimum wage range will be 10% this year, 12.5% ​​the next, 15% in 2026 and 17.5% in 2027.

In the second group, activities that fall between 50% and 75% of those with the greatest participation in the current system are concentrated. This is the case of the publishing, leather and footwear markets, as well as construction and infrastructure companies.

The employer contribution, in this case, will start at 15% this year, rising to 16.25% next year, 17.5% in 2026 and 18.75% in 2027.

Some sectors currently benefiting from the exemption, such as call centers, complained about having been excluded from the alternative proposal presented by the Treasury.

“The sectors that were left out were less focused on the benefit than the sectors that are there,” says Durigan.

According to him, the cutoff line for the activities covered was the open fiscal space of R$6 billion with the extinction of the benefit granted to the events sector.

Adherence to the regime is optional and companies that opt ​​for this modality will need to commit to maintaining the number of employees equal to or greater than that recorded on January 1st of each calendar year.

The model for monitoring this compensation imposed on companies will depend on regulation, but the Treasury says it is inspired by the examples of Pronampe —special credit line for microentrepreneurs— and Reiq (Special Regime for the Chemical Industry).

“This standard of exempting the first minimum wage should be for everyone. Due to the incentive for low-income work”, says Durigan. “Depending on the scope we give to the discussion of income reform, this debate may come.”

According to Durigan, the suggested regime can serve as a “pilot” for a definitive solution in a discussion about changes in income taxation.

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Understand the government’s proposals to compensate for losses or revenue waivers

WHAT ARE THE THREE MEASURES?

1. The gradual reinstatement of the payroll. At this point, a reduction in the employer quota rate will be tested in the range of one minimum wage

2. The limitation of tax compensation with court decisions on credits above R$10 million and within a maximum period of five years

3. The gradual extinction of Perse (Emergency Program for the Resumption of the Events Sector), which offers benefits to airlines and entertainment-related companies

HOW MUCH DO THEY MEAN IN RAISING?

According to the Treasury, the announced measures will make it possible to compensate for the R$ 12 billion shortfall that would be generated by the payroll tax exemption.

The gradual re-encumbrance will generate a smaller revenue loss of R$5.6 billion, which will be fully compensated by the changes in Perse. In government calculations, the extinction of the benefit to the events sector will add R$6 billion

WHAT IS TAXATION LIKE UNTIL APRIL 1, WHEN THE RULES COME INTO FORCE?

The payroll tax exemption is extended until April 1st. In other words, the 17 benefiting sectors of the economy maintain the prerogative of paying rates of 1% to 4.5% on gross revenue, instead of 20% on the Social Security payroll.