Tax Reform: debates in the final stretch seek to reduce impacts on Simples Nacional

Sectors and entities linked to micro and small entrepreneurs are working hard in the final stretch of regulating the first text of the tax reform to protect the sector, which is responsible for 30% of the country’s Gross Domestic Product (GDP). Fearing the effects that the changes could bring to Simples Nacional — impacting 95% of companies included in this format — 18 entities linked to small business signed a manifesto that explains the main points of the text that could cause losses to small business owners.

The document was delivered to all senators and should serve to draw parliamentarians’ attention to the impact of the change, as warned by the president of the Confederation of Commercial and Business Associations of Brazil (CACB), Alberto Coitai, one of the entities that heads the movement .

“What we are asking is for there to be a movement towards a PEC (Constitutional Amendment Proposal) that can give Simples the same tax credit status that other companies in the normal regime will have, so that we do not lose competitiveness. And there must also be simplification, as it is simple”, argues Cotait.

Manifesto proposals

There are 5 proposals to text which regulates the reform, currently being processed in the Senate. Among them, the dilemma that will be imposed on small business owners: remain fully in Simples Nacional — but transfer a smaller credit than that transferred by competitors outside the regime, losing competitiveness — or adopt a hybrid system, collecting IBS and CBS separately.

The manifesto also explains that this model would result in higher tax costs and the need to comply with more tax obligations, making the operation unviable for most small businesses.

The proposal from MSE representatives boils down to five points:

• full credit transfer from CBS;
• proportional deduction of exemptions or reduced rates;
• flexibility in adhering to the hybrid regime;
• elimination of the R$3.6 million sublimit;
• and non-application of split payment for provider companies.

For the president of the Parliamentary Front for Commerce, Services and Entrepreneurship (FCS), Efraim Filho (União-PB), Simples is provided for in the Constitution and parliamentarians are committed to ensuring the maintenance of the system.

“Simples is not something that is on the margins of the Brazilian development process. Caring for Simple means keeping doors open and ensuring that fathers and mothers can put bread on the table in their homes. It will be with this speech that we will try to make this victory happen in the plenary of the Federal Senate,” defended the parliamentarian.

Fundamental changes for system maintenance

With the vote scheduled for December 4th in the Senate Constitution and Justice Committee and then for consideration in the Senate plenary, rapid mobilization is essential for maintaining 61% of general jobs in the country today, as explains the president of the FCS in the Chamber, deputy Domingos Sávio (PL-MG).

“We are talking about the survival of 95% of companies in Brazil and a large part of them could become unviable if we do not make a very clear change in the tax reform that they are intending to approve.”

Estimates from the entities responsible for the manifesto sent to Congress estimate that if Simples is extinguished, 29% of companies will close, 20% will become informal and 18% will reduce activities.