Waiver of benefits for events is R$32 billion, says government – 12/30/2023 – Market

The tax benefit granted to the events sector will generate in 2023 a revenue waiver of up to seven times the R$4.4 billion indicated in the tax expenditure statement for the PLOA (Annual Budget Bill) of 2024, according to the government’s projection Lula (PT).

In a new estimate, the Federal Revenue indicated tax losses of between R$17 billion and R$32 billion this year with the measure. The definitive value will only be known in mid-2024.

The calculation was used by Minister Fernando Haddad (Finance) as justification to request the gradual extinction of Perse (Emergency Program for the Resumption of the Events Sector) in the presentation of the MP (provisional measure) that addresses the issue to the head of the Executive.

“In view of the fiscal impact of the benefit, associated with the lack of studies that demonstrate the relevance and effectiveness of indirect spending, it is proposed to revoke it”, wrote Haddad in a message addressed to President Lula.

When announcing the new economic measures, on Thursday (28), Haddad stated that the waiver already reached R$16 billion annually and that this was a conservative number.

Created on an emergency basis during the Covid-19 pandemic, Perse was renewed this year until 2026. “It was decided to extend it for another five years with the following commitment, that this program would be limited to R$4 billion per year of tax waiver “, he said.

“It turns out that we are closing the first year with more than R$16 billion in tax waivers. This is the part informed by the taxpayer, we have no idea what was not reported and was not paid”, he continued.

In the explanatory memorandum, Haddad also pointed out that the Federal Revenue Service warned during the discussion with the National Congress that “the values ​​actually enjoyed by taxpayers could be substantially higher.”

During the negotiations, the government had to give in to parliamentarians and maintain benefits for airlines and entertainment companies in order to approve other proposals of interest to the economic area.

The tax changes that will lead to the extinction of Perse will be carried out gradually over the next two years. Due to the nineteen – rule that determines a 90-day period for changing the rate – some taxes will be required again from April 1, 2024.

This is the case of CSLL (Social Contribution on Net Profit), Contribution to Social Integration and Public Servant Asset Formation Programs (PIS/Pasep) and Contribution to Social Security Financing (Cofins).

Due to the principle of annuality, companies will still be exempt from paying IRPJ (Corporate Income Tax) next year. Full collection of taxes on the events sector will resume from 2025.

Representatives of affected sectors received the measures announced by Haddad with concern. They argue that the proposals create legal uncertainty and put jobs at risk.

In the document addressed to Lula, Haddad also detailed how the gradual re-encumbrance of the payroll will be carried out and highlighted that the Constitution authorizes the establishment of differentiated rates “due to economic activity, the intensive use of labor, the size of the company or the structural condition of the labor market”.

The minister also said that the selection of who would be covered by the new rules “was guided by the importance of the current policy for exempt sectors, so as not to create major distortions in relation to what the policy already establishes and maintain a certain level of exemption for those sectors in which there is greater relevance of the benefit.”

Regarding the revocation of the reduced rate of social security contributions applicable to municipalities with up to 142 thousand inhabitants, the head of the Treasury highlighted that the waiver of revenue could worsen the deficient situation of the social security budget.

“Many of the most economically disadvantaged municipalities have the majority of their working capital dependent on the amounts paid by Social Security to their inhabitants. Therefore, in the event of the regime’s insufficiency, low-income people and smaller municipalities would suffer greater losses”, he stated.

The measure generated a reaction from the CNM (National Confederation of Municipalities), which criticized the government’s decision to revoke the benefit without presenting alternatives. In a statement, the entity said that it is studying measures to act in favor of the municipalities and that it will pressure the Lula government for answers.

To limit tax compensations resulting from court decisions, Haddad outlined an overview of the scenario. According to the minister, the expectation is that, by the end of 2023, the mark of R$1 trillion in debts offset in the last five years will be surpassed.

“Comparing the period from January to August 2023 with the same period in 2022, there was a nominal increase of 14.3% in the amounts compensated,” he said.

Haddad points out that, as of 2019, judicial credits have represented 38% of the credits used in compensation carried out through the refund request, reimbursement or reimbursement and compensation declaration program. In the period from 2005 to 2018, this percentage was 5%.

In the assessment made by the Treasury, 90% of the judicial credits used in compensation are related to the exclusion of ICMS from the tax calculation base.

In the request, the minister argues that the measure seeks to “protect federal revenue from the possibility of using billion-dollar credits to offset taxes.”

The change will apply to court decisions on tax credits above R$10 million, with a maximum period of five years for using these credits. This means, for example, that a company that has R$1 billion in credit will be able to compensate over five years in the amount of R$200 million annually.