Bill that extends payroll exemption goes to the Chamber

Payroll exemption will now be discussed by the Chamber of Deputies. The law project (PLP 334/2023) which extends payroll exemptions for 17 sectors of the economy until the end of 2027 was approved in a supplementary round by the Senate Economic Affairs Committee (CAE).

The text was finally approved last week. This means that it would only need to go through the plenary if at least nine senators presented an appeal in this regard. The deadline ended last Wednesday (28) without any senator asking for the proposal to be considered, which will now be analyzed by the deputies.

The exemption allows companies in the 17 sectors that employ the most in the country to pay less taxes. Instead of paying 20% of payroll to Social Security, companies can choose to pay 1% to 4.5% of gross revenue (invoicing).

The benefit ends at the end of 2023, but the bill aims to extend it for another 4 years. As a way to compensate for the loss of government revenue, the proposal extends, for the same period, the 1% increase in the Cofins rate (Contribution for the Financing of Social Security) on imported goods and services, whose term also ends in December from 2023.

Rodrigo Leite, professor of economics at the Coppead/UFRJ Institute, explains that the payroll exemption has existed for 12 years and that the end of the mechanism could increase unemployment in the benefited sectors.

“This is a payroll tax. Let’s assume that the exemption ends and a company that is paying 4.5% (on billing) has to pay 20%. You charge the company. What can it do? Dismiss 5%, 10% of the workforce to avoid this increase in labor costs”, he exemplifies.

Author of the bill, Senator Efraim Filho (União-PB) says that the end of exemption would have negative impacts on the job market. “It is estimated that there will be 600,000 layoffs in Brazil in these sectors if, as of January 2024, we do not have this extension”.

“We need to make life easier for those who generate jobs and those who produce. Exemption seeks this, the more jobs I can generate the less taxes I will pay”, adds Efraim.

Sectors benefited by the exemption

Clothing and clothing

shoes

Construction

Call center

Communication

Construction companies and infrastructure works

Leather

Manufacture of vehicles and bodywork

Machines and equipment

animal protein

Textile

Information Technology (IT)

Communication Technology (ICT)

Integrated circuit projects

Passenger subway transport

Collective road transport

road freight transport

Counties

Rapporteur of the complementary bill, Senator Angelo Coronel (PSD-BA) included an article in the text to extend the exemption to small municipalities. The idea is that cities with a population of less than 142,600 inhabitants have the social security contribution rate on payroll reduced from 20% to 8%. The parliamentarian estimates that more than 3,000 city halls will be able to benefit from the measure. Together, these municipalities hold 40% of the Brazilian population.

Senate committee approves extension of payroll exemption

By Brasil 61