Haddad contests 28% rate for estimated VAT per study

A rate of 28% of the Value Added Tax (VAT), to be created by the tax reform, does not consider a series of factors, said this Monday (17) the Minister of Finance, Fernando Haddad. He refuted a study by the Institute of Applied Economic Research (Ipea), according to which the future VAT would be higher than the 25% initially forecast because of the exceptions included during the vote by the deputies.

“That is a study that does not take into account a series of factors. There is no impact analysis, for example, on (combating) tax evasion, tax evasion, cutting tax expenses (elimination of tax incentives)”, declared Haddad upon arriving at the Ministry of Finance this Monday morning.

Based on the text approved by the Chamber of Deputies, the Ipea study estimates a 28.4% rate for VAT, which will affect consumption. This percentage would guarantee the highest rate in the world for taxes of this type, breaking the record of Hungary, which charges VAT at 27%.

According to Ipea, the exemptions included in the text, the benefit to sectors that will have a rate reduced by 60% and the creation of special regimes are behind the high rate. This is because, in order to offset the exemption for some segments of the economy, the government will have to tax the rest of the sectors more.

Transition

On the possibility of the rate being below 28%, the minister said it was necessary to evaluate two factors. The first is the transition, which will start in 2026 for the Contribution on Goods and Services (CBS), the federal part of the future VAT, and will run until 2032. “We will calibrate this according to the transition. So start in 2026 with a low rate to see the impact”, declared the minister.

The second factor, cited Haddad, will be possible changes in the tax reform by the Senate, which may review some exceptions granted by the Chamber. With fewer exemptions and sectors with reduced rates, the general rate may decrease.

Despite contesting the estimate of 28.4% rate, Haddad considered the weightings made by Ipea positive and defended a downsizing of the reform, with the revision of the list of exceptions. “The warning that the Ipea study makes is good, because it shows that the more exceptions there are (tax reform), the less it will work. So you have to calibrate the exceptions well, so that they are well justified, ”he said.

Even in the case of a high VAT, the study considers the tax reform beneficial for the Brazilian economy, because it will improve the business environment and simplify the collection and payment of taxes. Recently, Ipea released another study, according to which the reform could generate a 2.39% gain in Gross Domestic Product (GDP) by 2032.