State finance secretaries disagree on centralized tax authority

While the representative of Pará, René Júnior, argues that the creation of a centralized tax authority would result in the loss of autonomy of the states, the deputy secretary of Minas Gerais, Luiz Claudio Gomes, defends a national agency that deals with taxation. The Secretary of Finance of Bahia, Manoel Vitório, also participated in the debate and stated that the “autonomy of the states needs to be preserved”.

René Junior is in favor of implementing the value-added tax (VAT), provided for in the Proposed Amendment to the Constitution (PEC) 110/2019, pending in the Senate. The text transforms all taxes at the federal, state and municipal levels into a single tribute, the VAT. For the secretary of Pará, it is important to have national legislation to simplify the Brazilian tax system. However, René Junior believes that the creation of a centralized tax authority violates the autonomy of the states.

“We do not believe that a national agency can function. We have commercial transactions, invoices with one hundred items, it is possible, yes (the creation), but Bernard Appy himself (Extraordinary Secretary for Tax Reform) thinks that developing such a system would take at least 3 years. I think each state collects its own, inspects its own. This hurts the autonomy of the states, ”he says.

In contrast, the deputy secretary of Minas Gerais argues that, in the event of the creation of this “national agency”, states and municipalities will effectively form part of the governance of this tax authority and will not depend on transfers from the Union. Luiz Claudio Gomes argues that the use of VAT is only possible if there is centralization and says that there is no loss of autonomy.

“I do not believe there is a loss of autonomy. Autonomy means having the ability to charge, having the ability to supervise. We’re not missing any of that. So autonomy is not an issue. We also believe that this proposed system only works with a centralized tax authority”, highlights Gomes.

Brazilian tax system

Tax lawyer Daniel Moreti explains that the current Brazilian tax system works based on a logic of dividing taxes between the Union, states, Federal District and municipalities. Therefore, each federative entity has autonomy to create taxation rules.

Each of the 26 states and the DF can create mechanisms for the collection and inspection of ICMS, a state tax. The same happens at the municipal level in relation to the ISS. In this case, the 5,568 municipalities may have different legislation, according to Moreti.

According to the Ministry of Economy, a value-added tax allows companies to pay only on the value added to the product or service. The folder states that the unification of taxes brings more transparency, as it is levied on gross revenue and not on all revenue. In addition, the simplification of taxation with the adoption of VAT would generate more efficiency in the organization of economic activity, which would stimulate competition between companies and benefit consumers.

Daniel Moreti exemplifies: “Imagine that you buy a can of soda that costs R$5. When you go to the cashier, you pay R$5 plus R$1 in tax. The one real is charged exactly on the outside value of the goods, so that the taxpayer can see exactly how much it cost and what the tax burden was for that operation”.