Will Tax Reform be sliced ​​up to speed up enactment? – 09/11/2023 – What tax is this

The return of the Tax Reform proposal to the Chamber of Deputies, after approval this Wednesday (8) by the Senate, is just one of the many steps that remain to build the new taxation regime in the country.

The first question to be asked now is about the possibility of slicing up the proposal and promulgating, initially, only sections that were approved by the deputies and were not modified by the Senate.

The slicing, suggested by the president of the Chamber of Deputies, Arthur Lira (PP-AL), depends both on a technical analysis and a political calculation, as recalled by rapporteur Eduardo Braga (MDB-AM).

Maurício Barros, partner in the tax area at Demarest Advogados, says that the main sections that passed in the Senate in the same way that they were approved in the Chamber represent “the general design” of the IBS and CBS and, to a lesser extent, the Selective Tax.

Some differentiated and specific regimes were also maintained.

There were, however, many changes in relation to issues related to the states, such as changing values ​​in the regional fund.

As it is a PEC (proposed amendment to the Constitution), the text approved in both Houses is not sanctioned by the President of the Republic. It will be promulgated by the National Congress. But it is only possible to enact devices approved identically by the Chamber and Senate.

If slicing is not possible, a new vote by the Chamber will be necessary in two rounds. And then we will return to the first question, that is, whether it will be possible to enact something this year.

The race against time is also important for political reasons — 2024 is an election year — and technical reasons.

Once the changes to the Constitution have been consolidated, it is necessary to approve the complementary laws that will regulate the reform. This needs to be done in time to enable the construction of the new system and the start of the transition in 2026.

Also next year, the government intends to send to Congress the project that will deal with the taxation of profits and dividends with Income Tax and, possibly, changes in payroll contributions.

Neglecting this second reform would not be possible for a government that made the issue a campaign promise.

The way in which PEC 45 was approved, with many exceptions that benefit sectors and few that reduce the burden on the poorest consumers, partially, but not completely, frustrates the expectation of more effective tax justice.

The fight over Income Tax could be similar, maintaining privileges only for those who can pay to have their lobbies attended to by Congress.

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