Haddad defends that payroll exemption be discussed together with income tax

According to the minister, it makes no sense to discuss taxation on employment in the first phase of the reform, which changes taxation on consumption. “It (payroll exemption) must be combined (with the Income Tax reform)”, declared Haddad upon arriving at the Ministry of Finance, in Brasília.

The minister warned of the risk of including the discussion on payroll exemption in the first stage of the reform, approved by the Chamber of Deputies last week and which will be forwarded to the Senate. “It would be really bad if that happened. It will mix very different subjects and will compromise the reform on consumption”, said Haddad.

Last month, Haddad had said that payroll exemption would only be discussed in the second phase of the tax reform. According to the minister, it’s up to the government forward the proposal.

At the end of June, the Economic Affairs Committee (CAE) of the Senate approved, in two shifts, the extension until 2027 of payroll exemptions for 17 sectors of the economy. Approved on a terminating basis, the text did not go through the plenary of the Senate and was sent to the Chamber of Deputies.

Term

The minister also stated that the proposal that reformulates the Income Tax will only be sent to Congress after the Senate approves the tax reform on consumption. “Only after the approval of the consumption tax reform, towards the end of the year”, he declared. Haddad stated that he does not intend to take advantage of the Income Tax bill passed by the House in 2021.

Among the changes foreseen in the Income Tax, are the resumption of taxation on dividends (portion of a company’s profit distributed to shareholders). Since 1995, Brazil has not charged Income Tax on dividends, being one of the few countries that adopt the practice.

To prevent the increase in the tax burden on companies, the taxation of dividends would be accompanied by a drop in the Social Contribution on Net Income (CSLL) and the Corporate Income Tax (IRPJ). Haddad said that the economic team still has no idea of ​​the rate to be charged on dividends, nor the reduction of IRPJ and CSLL. “Let’s start the internal discussions at the Farm. Then we will present it to the economic area, with the same protocol”, he explained.

Meta fiscal

According to Haddad, the fiscal target for next year does not depend on the reform of the Income Tax. This is because the objective of the second phase is to redistribute the tax burden among sectors of the economy, with minimal impacts on government revenue.

The proposal for the new fiscal framework, which returned to the Chamber and will only be voted on in August, establishes a target of zero primary result (neither deficit nor surplus) next year for the Central Government (National Treasury, Social Security and Central Bank). The text provides for a tolerance margin of 0.25 percentage points of the Gross Domestic Product (GDP), which would allow for a deficit of 0.25% of GDP or a surplus of 0.25% in 2024.