Payroll tax increase goes to the Chamber
The project was authored by Senator Efraim Filho (PB) and complies with an agreement signed between the Executive Branch and the National Congress on Law 14,784 of 2023, which extended the tax exemption until the end of 2027.
For the rapporteur of the matter, Senator Jaques Wagner, the project is relevant for the country’s fiscal balance. He also pointed out that job creation in a country comes from economic growth and not from tax relief.
“There are no studies that prove that tax relief generates employment. What generates employment is economic growth and money in the hands of the people,” he said in the Plenary.
The managing director of the Brazilian Textile and Clothing Industry Association (Abit), Fernando Valente Pimentel, believes that the approval of the text was not ideal and points out that there is a need for greater focus on actions to reduce informal jobs in the country, thus reducing the cost of formal jobs, seeking greater competition between companies.
“Regarding the approval of the so-called payroll tax relief, we understand that it was not ideal, but it was the art of the possible within the negotiation process. We have to work effectively to reduce the cost of formal employment in this country and, with that, improve the number of people who work regularly, creating better living conditions and adequate conditions for competition between companies,” says Pimentel.
Fernando Valente Pimentel assesses the possible consequences of the text throughout the transition period and highlights the need to look at the sustainability of social security in the country.
“In addition to this issue, we will have to find other ways to finance social security, and therefore a reform is on the horizon again. And how can we do this within new forms of work to make social security sustainable? These are the major issues that go beyond what was approved, which, as far as possible, will help a little in the next two years, mainly; by the third or fourth year, perhaps, not much. But the fundamental issue is the structural reduction of the cost of formal employment in the country without compromising social security and helping companies to hire more and pay more and better,” Pimentel points out.
Check out the main aspects of the text:
- The gradual re-taxation of payroll taxes will last three years (2025 to 2027);
- Full exemption is maintained in 2024;
- During the entire transition, the 13th salary payroll remains completely exempt.
According to the text, the gradual resumption of taxation will occur from 2025, with a rate of 5%. In 2026, 10% will be charged and, in the following year, 20%, when the exemption ends.
The proposal also gradually reduces, during the transition period, the additional 1% on the Cofins-Importation tax established due to the payroll tax relief. The tax will be reduced to 0.8% in 2025 and, subsequently, a reduction of 0.6% is expected in 2026. In 2027, it will be 0.4%.
Regarding the exemption of payroll taxes for municipalities, according to the bill, the resumption of social security contributions for municipalities with a population of less than 156,000 inhabitants will also follow a staggered regime. Until the end of 2024, it will be 8%. In 2025, the percentage will rise to 12%. The following year, it will be 16% and will reach 20% in 2027 – which marks the end of the transition period.
By Brasil 61
