Understand the stages of tax reform in Congress – 03/08/2023 – Market

The tax reform takes its first steps in Congress under the government of President Luiz Inácio Lula da Silva, with the beginning of the phase of public hearings and debates in the working group that discusses the subject this Wednesday (8), under the blessing of both of the government and of the presidents of the Chamber, Arthur Lira (PP-AL), and of the Senate, Rodrigo Pacheco (PSD-AL).

Even though it was chosen as a central priority by political leaders in Congress and the Lula government, the reform will still have a long way of negotiating ahead in the search for a consensus and enough votes to approve it.

Check below the main information about the tax reform so far:

WORK GROUP

• The reform is currently discussed in a working group sponsored by Lira, tasked with updating the discussion and familiarizing deputies with the matter.
• Formed by 12 members, the GT has a period of 90 days, extendable for an equal period, to complete the work.
• The idea of ​​the group’s coordinator, Deputy Aguinaldo Ribeiro (PP-PB), is to publish a text with the conclusion of the debates in the collegiate on May 16.
• Before, the group should hold a series of hearings and seminars, which will be attended by the extraordinary secretary for Tax Reform at the Ministry of Finance, Bernard Appy, creator of one of the proposals under discussion.

THE PROPOSAL

• Text will start from two Proposals for Amendment to the Constitution (PEC) — 45 and 110 — which are already being discussed in Congress on tax reform to prepare the text to be submitted in plenary.
• Authored by Deputy Baleia Rossi (MDB-SP), PEC 45 was edited based on the tax reform developed by the Fiscal Citizenship Center (CCiF), a think tank that discusses the national tax system and suggested a text under the direction of Appy.
• PEC 45, which proposes the replacement of five taxes (PIS, Cofins, ISS, ICMS and IPI) by a single tax on goods and services, is being discussed in the Chamber and is ready to be voted on in plenary.
• In the Senate, PEC 110 provides for the extinction of nine taxes — IPI, IOF, PIS, Pasep, Cofins, CIDE-Fuel, Salary-Education, ICMS, ISS. The matter awaits a vote in the Constitution and Justice Commission (CCJ). Only then could it proceed to plenary. The most likely, however, is that the consensus text to be voted on by the deputies will be attached to this proposal and replace it.
• While PEC 45 provides for the creation of a single tax on goods and services at the federal, state and municipal levels, PEC 110 provides for dual taxation: a value-added tax for the Union and another for the other entities of the Federation.

IN PLENARY

• Once the work of the WG is concluded and there are votes for the approval of the proposal, the PEC can be discussed in the plenary of the Chamber, which Lira intends to do in May.
• The president of the Chamber said that, at the moment, the government does not yet have a level of solid support to face the vote.
• As it is a PEC, at least 308 votes from the 513 deputies are required, in two rounds of voting, for its approval.
• The procedural rules impose a five-session break between the two shifts, but this deadline can be broken. All that is needed is for the plenary to approve an interstitial breach request.

SENATE

• Approved by the House, the proposal goes to the Senate. After the publication of the text in the Journal of the Federal Senate, the PEC goes to the House’s CCJ.
• Once the vote in the CCJ is concluded, the measure may be included in the agenda of the plenary 5 days after the publication of the opinion in the Diary of the Federal Senate.
• Included in the agenda, the matter is submitted to two rounds of voting, with an interval of 5 working days between them.
• To be approved, the proposal needs three-fifths of the votes, that is, 49 senators out of the 81.
• The score recorded in the election for the presidency of the Senate gives rise to the interpretation that the government has a more consolidated base in the House, compared to the Chamber.
• Approved without changes, the PEC follows the promulgation by the National Congress. If it is modified by senators, however, the proposal needs to be reassessed by deputies.
• Common practice when there are disagreements between deputies and senators on some points of PECs, the slicing of the proposal may be required to ensure that what is consensus in the text can be enacted.