Chamber of Deputies approves bill of tax reform in two rounds
The final version of the text was presented by the rapporteur, federal deputy Aguinaldo Ribeiro (PP-PB), a few hours before the vote — which was adopted by the Lula government and the president of the House, Arthur Lira (PP-AL). Earlier, federal deputies rejected a request from the PL, the party of former president Jair Bolsonaro, which asked for the postponement of the vote on the proposal. The opposition asked for more time to discuss the matter.
The text unifies the five main taxes on the consumption of goods and services into a Dual Value Added Tax (VAT). In practice, two taxes. On the one hand, IPI, PIS and Cofins, from the Union, give rise to the Contribution on Goods and Services (CBS). On the other hand, ICMS (state) and ISS (municipal) form the Tax on Goods and Services (IBS).
The PEC leaves the VAT rate to a complementary law. That is, the percentage of tax that will be levied on products and services consumed by Brazilians. It is estimated that the threshold is 25%.
According to the proposal, some specific goods and services will have the VAT rate reduced by 60%, as is the case of education, health, public transport and agricultural products. Target of controversy, the taxation of basic basket items — which in the original proposal would be half of the standard VAT — was zeroed by the rapporteur.
At the beginning of the month, the Brazilian Association of Supermarkets (Abras) presented a study that pointed out that the reform could cause an increase of almost 60% in taxes that fall on the basic basket.
Despite expressive approval in the Chamber, the text is not a consensus among the productive sector and among state and municipal representatives. The service sector, which is the one that employs the most in the country and is responsible for 70% of the wealth produced in Brazil, estimates that the tax reform could raise the tax burden on the sector by up to 260%, according to calculations by the National Confederation of Commerce of Goods, Services and Tourism (CNC).
The CNC argues that to absorb the impacts that a possible 25% VAT rate would have on the sector, businessmen would have to cut costs — which could lead to the unemployment of 3 out of 10 workers, totaling 3.8 million layoffs.
Transition
The transition from the current to the new tax system will take seven years. It starts in 2026 and ends in 2032. In 2033, the new model of taxation on consumption starts to work in full.
Another transition that the text envisages is the one in which the incidence of the tax is changed from the origin of the product or service (as it currently works) to where people consume it. The shift will take 50 years, stretching from 2029 to 2078.
Cashback
The proposal provides for the creation of a cashback, in which part of the tax paid by consumers is refunded. The details will also be left to a complementary law, but the tendency is for the novelty to be restricted to low-income families.
Federal Council
One of the points of greatest discussion in recent days — the composition of the Federative Council — was defined by the rapporteur Aguinaldo Ribeiro. Governors fear losing autonomy with the body that will be responsible for collecting, managing and distributing the Tax on Goods and Services.
Among the fears is that the centralization of decisions will give power to the federal government to distribute the resources raised with the IBS based on criteria that are not objective, favoring allies. The governor of São Paulo, Tarcísio de Freitas, articulated a composition of the Federative Council that would give more power to the states and municipalities — especially those in the South and Southeast, responsible for most of the collection.
The rapporteur relented. According to the PEC, the council will be formed by 54 representatives, one for each state and the Federal District. The municipalities will also have 27 representatives. The decisions of the collegiate will only be approved if they have an absolute majority of votes, in addition to having to represent more than 60% of the country’s population.
FDR
The text creates the National Fund for Regional Development (FDR), whose objective is to reduce inequalities between states, municipalities and the Federal District. The FDR will be funded by the federal government.
In the current model, as the tax collection remains with the state that produced the good or service and not with the one where consumption took place, the governors take the opportunity to reduce the tax burden in order to attract investments, a possibility that ends with the reform. The fund is a way to compensate subnational entities for the change in taxation from origin to destination, which will put an end to the so-called tax war.
Federation entities will be able to apply FDR resources in carrying out studies, projects and infrastructure works, promoting productive activities with high potential for generating employment, income and promoting actions aimed at scientific and technological development and innovation.
The Union will have to contribute R$ 8 billion in 2029. And this amount will gradually grow until it reaches R$ 40 billion in 2032. The criteria for distributing the resources will be left to a complementary law, according to the PEC.
Tax Benefit Compensation Fund
This other fund brought by the proposal aims to ensure that the states do not lose money due to the tax benefits they granted to the productive sector, as a way of attracting companies until 2032.
According to the PEC, the federal government will transfer around R$ 160 billion to subnational entities over eight years. Check the contributions year by year.
2025 – BRL 8 billion;
2026 – BRL 16 billion;
2027 – BRL 24 billion;
2028 – BRL 32 billion;
2029 – BRL 32 billion;
2030 – BRL 24 billion;
2031 – BRL 16 billion;
2032 – BRL 8 billion.
selective tax
Known as the “sin tax”, the Selective Tax (IS) will focus on goods and services considered harmful to health and the environment. This is another matter for a complementary law.
Procedure
To be definitively approved, the PEC needs to pass through the sieve of 49 of the 81 senators, also in two rounds of voting.
By Brasil 61
