Tax reform: House of Representatives WG report proposes Dual IVA
According to the report, the five main taxes on consumption (IPI, PIS, Cofins, ICMS and ISS) will be replaced by a value-added tax (IVA) – named Tax on Goods and Services (IBS). In response to requests from mayors and governors, the IBS will be dual. This means that the Union will be responsible for managing the federal tax that will replace IPI, PIS and Cofins, while states and municipalities will share autonomy over the tax that will result from the combination of ICMS and ISS.
The GT recommends that the IBS have a broad standard rate, which will apply to the entire consumption base, including goods and services provided through digital platforms. The text does not specify the rate, which should remain for the PEC. Contrary to what exists today, taxation on consumption will occur at the destination, that is, where the person or company purchased the good or service, and no longer at the source.
However, some sectors, such as health, education, collective public transport, regional aviation and rural production should receive different treatment. In practice, they will pay less tax. The report also recommends evaluating the possibility of maintaining special treatment for products in the basic food basket.
The Manaus Free Trade Zone and the companies that are included in the Simples Nacional will continue as favored tax regimes.
Check below the other guidelines of the Tax Reform WG.
Cashback
The text foresees that part of the tax paid by low-income families will be returned to them. This is the cashback system (“cash back”). The criteria for defining the eligible public to be benefited were not detailed, nor how the tool would be implemented. One of the suggestions is that the return should be given immediately, at the time of purchase of the product or service.
FDR
The report proposes the creation of a Regional Development Fund (FDR) to reduce inequalities between the country’s regions and encourage the maintenance of companies in less developed areas, since they will no longer have tax benefits from the taxes that will be extinct. The resources to form the FDR should come, primarily, from the Union, pointed out Aguinaldo Ribeiro.
Transition
Although it did not give a deadline for the new tax system to take effect definitively, the WG suggested that the transition be long, contemplating a faster change for Union taxes, such as PIS and Cofins, and a slower one for ICMS and ISS. In PEC 110, from the Senate, the term is 40 years. In PEC 45, of 52. The idea is that states and municipalities have time to get used to the new model.
The objective is to ensure that there will be no drop in revenue from the federation’s entities compared to the current level, based on the proportion of revenues in relation to the Gross Domestic Product (GDP). “Under no circumstances will there be an increase in the tax burden,” said Ribeiro.
IBS Management
The dual system will have shared management between the Union, states, DF and municipalities. The text suggests the creation of a Federative Council, composed of state and municipal farms.
excise tax
One of the guidelines in the report provides for the creation of a selective tax, to discourage the consumption of goods and services considered harmful to health or the environment. The text presented this Tuesday (6) does not detail what would be the impacted items and suggests that this be detailed in a complementary law after the approval of the PEC – if it occurs.
IPVA
The Working Group also proposes that the IPVA should be levied on water and air vehicles for private use. Deputies want these goods “used for recreational purposes” to be charged in the same way as cars used by families on a daily basis.
By Brasil 61
