“We have a much more positive view of the tax reform than a fortnight ago”, says an economist at the Confederation of Commerce and Services

“Without a doubt, we have a much more positive view of the reform than we had, for example, a fortnight ago, although we still pay attention to some points that need to be improved. I believe that there will be room and will for that”, says Bentes.

According to the economist, the current tax system is “chaotic” and the CNC supports most of the points of the Proposed Amendment to the Constitution (PEC) 45/2019. Bentes says that the adoption of non-cumulative taxes – which will allow the productive sector to reduce tax debts – is “quite positive” and is as important as the definition of the reference rate, which has not yet been disclosed.

Evolution

The preliminary version of the PEC foresaw that products and services from seven segments would have rates reduced to half of the reference rate. That is, in a scenario where the dual Value Added Tax (IVA), which replaces IPI, PIS, Cofins, ICMS and ISS, is 25%, these items would have rates of 12.5%.

They received different treatment in that version:

• Education;
• Health;
• Medical devices;
• Medicines;
• Urban, semi-urban or metropolitan public transport;
• Agricultural, fishing, forestry and vegetable extractive products in natura;
• Agricultural inputs, food intended for human consumption and personal hygiene products;
• National artistic and cultural activities.

At the end of June, the CNC published a study that estimated an increase of up to 260% in the tax burden on services, if a 25% VAT was approved. This would cause an increase of more than R$ 200 billion in tax collection by the tertiary sector.

The survey pointed out that to neutralize the increase without compromising the companies’ cash flow, three out of ten formal vacancies could be closed, totaling 3.8 million unemployed. The sector is responsible for almost 60% of formal jobs in the country.

On the trade side, the study pointed out that the retail of footwear, leather and travel articles (41.2%), wholesale of footwear and travel articles (37.3%), wholesale of equipment and articles for personal and domestic use (32.2%), retail clothing and accessories (31.8%) and retail fabrics, haberdashery, clothing and footwear (31.4%), would be the most affected.

In services, the most burdened would be recreational and cultural activities (171%), personal services (160%), selection, agency and hiring of labor (157%), accommodation services (153%) and services for buildings and landscaping activities (145%).

Responsible for 70% of the wealth produced in the country, the service sector fears paying the tax reform bill

Chamber of Deputies approves PEC of tax reform in two rounds

In the final stretch of negotiations before the approval of the proposal, Ribeiro increased from 50% to 60% the reduction in the rate of the seven privileged segments in the first version of the PEC, in addition to having added the following activities to the list:

• Collective rail and water transport;
• Accessibility devices for people with disabilities;
• Medicines and basic menstrual health care products;
• Journalistic and audiovisual productions and sports activities;
• Goods and services related to national security and sovereignty, information security and cyber security.

In addition, hotel services, amusement parks and theme parks, restaurants and regional aviation were included in the list of those that will receive differentiated treatment in the new tax system.

According to Fabio Bentes, the concessions were very important, since the capacity of the service sector to recover credits through the abatement of input costs is much lower than that of the industry, for example.

“We are moving towards offering a differentiated rate for a sector that has a limited capacity to generate tax credits. We see the discussion evolving. This is very good. The CNC continues to strive to try to improve understanding of the services sector. And we believe that we can have progress in the Senate”, he evaluates.

The understanding is that the rate reduced by 60% for part of goods and services is “very reasonable”. About six months ago, the CNC suggested a 10.7% rate for VAT. In a scenario where the reference VAT rate is 25%, the reduced rate will remain at the 10% level. “It is in line with our expectations for most of the sectors that we represent”, says the economist.

He claims that the entity’s objective in the second half will be to convince senators to include other segments that employ a lot among those that will have differentiated VAT.