Video deceives by using STF summary to say that Tax Reform would be unconstitutional – 07/14/2023 – Market

Contrary to what the person responsible for publishing a video that went viral on social media says, the summary 69 of the STF (Federal Supreme Court), according to which “the state Constitution cannot establish a limit for the increase of municipal taxes”, does not attest to the unconstitutionality of the PEC (Proposed Constitutional Amendment) of Tax Reform 45/2019.

Experts consulted by the Comprova Project say that the summary discusses the relationship between state and municipal laws, and that the Federal Constitution has competence to legislate on the tax regime of states and municipalities.

The Ministry of Finance, which analyzed the proposal through the Sert (Extraordinary Secretariat for Tax Reform), the Attorney General’s Office of the National Treasury and the Federal Revenue of Brazil, is also considering the constitutional reform. Sert relied on the assistance of the AGU tax advisor.

The processing of the PEC in the Chamber of Deputies was accompanied by the ministries of Development, Industry, Commerce and Services; Planning and Budgeting; Management; Health; Education; Social development; and Institutional Relations.

Misleading, for Comprova, is content that confuses, with or without the deliberate intention of causing harm.

Reach

Comprova investigates suspicious content with greater reach on social networks. On Instagram, until July 14, the publication had 34.4 thousand likes, while on Telegram the number of views was 4.8 thousand.

How do we check

The first step was to investigate what STF summary 69 says. For this, we consulted the jurisprudence on the body’s website. We then gathered information about the tax reform passed by the Chamber of Deputies in early July from the professional press.

The team also spoke with two specialists: Paulo Caliendo, Doctor of Law in the Tax Law Concentration area and professor at the Law School of the Pontifical Catholic University of Rio Grande do Sul (PUCRS); and Rodrigo Kanayama, PhD in State Law and associate professor at the Department of Public Law at the Faculty of Law of the Federal University of Paraná (UFPR).

He also sought out the Ministry of Finance and the Attorney General’s Office (AGU). Finally, she contacted the person responsible for publishing the content.

Competence

The author of the investigated video states that the Tax Reform would be unconstitutional because “if not even the state in which the municipality is located can interfere in the tax that is the responsibility of the municipality, why is it that the Federal Constitution can extinguish and create another tax rate a tax that she herself gave the authority to the municipality?”.

However, experts consulted by the report claim that the Federal Constitution can establish tax regimes, change taxes, or even delegate to infraconstitutional legislation (ordinary or complementary laws) the competence to define matters related to tax rates.

“He [autor do vídeo] transported a discussion that occurs in relation to states and municipalities to the scope of the Federal Constitution. This is completely wrong. Saying that the Constitution cannot establish tax regimes is a mistaken argument. There are several federal laws, which are under the Constitution, which define tax regimes that are applied to states or municipalities. For example, the ISS is limited and regulated by Complementary Law 116. And this has never been declared unconstitutional by the Federal Supreme Court”, says Rodrigo Kanayama.

Regarding summary 69, Kanayama explains that the STF’s understanding is that the state constitution cannot interfere with municipal tax jurisdiction. However, contrary to what the author of the video says, this is not what the tax reform proposes.

“The STF understands in relation to the state constitution that it cannot enter into municipal jurisdiction, because the state constitution does not have the same force as the Federal Constitution, that is, the state constitution is below the Federal one, because it is not a constitution in the strict sense The Federal Constitution can create these regimes [tributários]there is nothing unconstitutional about it.”

For Paulo Caliendo, the reform is constitutional since it is possible, respecting the legislative process, to change the Constitution. “[A PEC] is changing competences and saying that competence [de administrar os tributos] is a joint effort of states and municipalities. It’s fully viable.”

The PUCRS professor points out that, in order to be unconstitutional, the tax reform would need to violate item I of paragraph 4 of article 60 of the Constitution, which says: “The proposal for an amendment to abolish the federative form of the State will not be subject to deliberation”. .

“So, we would have to say that the tax reform offends the federative form or extinguishes it, because it removes the financial autonomy of the municipalities. This is the point of contention, he [autor do conteúdo] think so, but we think not. And, on the contrary, we believe that this point is even expanded [a autonomia financeira dos municípios]. What is misleading is claiming that this is something clear and unquestionable.”

Constitutional

According to the Ministry of Finance, state and municipal tax powers are not being emptied, but reinforced.

“There are several discussions currently in the Judiciary that involve the jurisdiction of states and municipalities to tax, which concern the material basis provided for in the Constitution for each of them, that is, goods for states and services for municipalities. With the reform, these discussions will become end, because the proposal brought in, in an express way, these materialities”, he said to the report, in a note.

The body also said that the STF’s summary 69 deals with a situation “completely different” from the proposed tax reform. “First because, as seen, the PEC is not limiting the competence of the states and municipalities, which will have a reinforced base and will continue to be able to establish their own rates. Second, because the Federal Constitution cannot be mirrored with the State Constitution. The Federal Constitution it is not from the Union, a federative entity, but from the Federative Republic of Brazil, which includes the Union, states and municipalities jointly.”

Tax reform

PEC 45/2019 establishing the tax reform was approved by the Chamber of Deputies on July 7 of this year. The text is being discussed in the Senate, where it needs to be approved in two rounds by at least 49 senators to be enacted.

The main change foreseen by the PEC is the unification of five taxes, three of them federal, one state and one municipal. They are: PIS (Social Integration Program), Cofins (Contribution for the Financing of Social Security), IPI (Tax on Industrialized Products), ICMS (Tax on Circulation of Goods and Services), and ISS (Tax on Services), respectively.

These five taxes will be replaced by VAT (Value Added Tax), which will be divided into two: one federal and one for states and municipalities.

• Federal IVA will be called CBS (Contribution on Goods and Services) and will replace IPI, PIS and Cofins;
• State and municipal VAT will be called IBS (Tax on Goods and Services) and will replace ICMS and ISS.

This means that, in the model proposed by the tax reform, the Union defines the CBS rate, while states and municipalities are responsible for the IBS. Regarding local taxes, state governments and city halls will have to agree on a single rate, which should put an end to the so-called tax war.

The text also provides for the same rate for products, with some exceptions, such as basic basket items (which will be exempt) and products harmful to health and the environment, such as cigarettes and alcohol (which will pay more). The new rate will be defined through a Bill (PL).

The PEC also contemplates the creation of some funds, whose objective is to compensate the states for any losses in collection, such as the FDR (Regional Development Fund), budgeted at R$ 40 billion from 2033, and the Benefit Compensation Fund Fiscal, which will guarantee tax benefits already granted by the states until 2032.

There will be a transition phase for the implementation of the reform, which should last from 2026 to 2032, as reported by the BBC. In 2026, there will be a charge of 0.9% for CBS and 0.1% for IBS —these rates will be used as an initial test. In the following year, PIS and Cofins will be extinguished, and VAT will come into effect. As of 2029, there will be a staggered reduction in state and municipal taxes (ICMS and ISS), with a gradual increase in state and municipal VAT. In 2033, old taxes will be phased out.

What the person responsible for the publication says

The author was searched for by WhatsApp, Instagram and by email from an institute of which he would be director-founder. The institute requested more information about the check and the project, but, after returning from Comprova, there was no response.

What can we learn from this check

When faced with very technical and restricted information, try to understand the context of the documentation presented and the opinion of other specialists on the subject. In the specific situation, which refers to the constitutionality of a bill, check how these processes work, whose legality must be analyzed.

Also look for information in the professional press, as the legality of a PEC would be a subject between specialists and parliamentarians.

why do we investigate

Comprova monitors suspicious content published on social networks and messaging apps about public policies and elections at the federal level and opens investigations for those publications that have achieved greater reach and engagement. You can also suggest checks via WhatsApp +55 11 97045-4984. Suggestions and questions related to questionable content can also be sent to Sheet via WhatsApp 11 99486-0293.

Other checks on the topic

The PEC that institutes a tax reform has already been the target of other pieces of misinformation since the beginning of its course in the National Congress. Estadão Verify found it false that the text ends the right to inheritance in Brazil.

Aos Fatos checked a video with various misinformation about the bill, in which it was said, among other things, that the Union would now receive all taxes, including state and municipal taxes. He also clarified that the proposal does not change the Income Tax or establish gender and race criteria.

Previously, Comprova showed that Lula did not sign a decree to put an end to private property and that the video deceives by stating that Justice authorized home invasions in Brazil.