Fiscal framework does not provide for review of inefficient spending, criticizes economist

The new fiscal rule to balance and keep public accounts under control brings measures for the government to seek more and more revenue, but does not point to mechanisms for reviewing inefficient spending. The assessment is made by economist and public policy coordinator Deborah Bizarria. She claims that this is one of the negative points of the so-called fiscal framework (PLP 93/2023). In addition, he points out that the rule does not provide for clear accountability in case the government does not meet the established target.

“Since the goal of the framework is the surplus, there is a tendency to seek revenue and increase the tax burden, in case the government really wants to spend more, even with the triggers of between 30% and 70% of the revenue, which is what the government can spend. If Brazil grows a lot and the collection grows a lot, there is a limit, which is 2.5%, and if we have a crisis, it will preserve the minimum of 0.6%. The general incentive is that the government is always looking for more revenue and not necessarily reviewing spending, ”he explains.

The project sets limits for the growth of primary expenditure, with annual readjustments, considering the Extended National Consumer Price Index (IPCA) and a percentage on the growth of primary revenue. Master in Tax Law from PUC/SP and advisor to the Brazilian Association of Tax Advocacy (ABAT), Eduardo Natal, explains that the current government needs to have more ‘cash’ resources to fulfill its “deeper” social commitment .

“The framework, in general terms, is a proposal for conducting the accounts of the Brazilian economy in which it takes into account that the deficit or public debt limits can be higher or lower depending on the revenue that the country manages to collect, mainly the Federal Government. . It is a moving metric, if it collects more, the government can spend more”, he says.

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Tax reform and fiscal framework

The tax reform (PEC 45/2019) aims to simplify the Brazilian tax system — named by the World Bank as one of the worst in the world — and greater transparency for the taxpayer. The proposal 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)

Daniel Moreti, PhD and Master in Tax Law from PUC/SP and judge at the Tax and Fee Court of the State of São Paulo, explains that tax reform and the fiscal framework are two sides of the same coin. According to the tax expert, the reform seeks to correct problems in the current system with measures related to collection; the framework takes care of government spending.

“The fiscal framework deals with the other end, which is the form and existing limits or not for the State to spend. It is obvious that these two ends must be balanced, otherwise we will have very serious problems in the public accounts, in general. So, it is expected that this fiscal framework will be approved as soon as the National Congress returns — and that the established limits will be respected”, he points out.

Approved by the Senate at the end of June, the new fiscal framework will be analyzed again by the Chamber of Deputies in the second half of the year, as the text has undergone changes.