Tax incentives for states will have more transparency, says Haddad

Tax benefits for states will have more transparency to avoid loss of collection for the Union, said, this Tuesday (4th), in Brasília, the Minister of Finance, Fernando Haddad. In conversation with journalists, he stated that the government intends to issue a provisional measure to prevent subsidies (financial aid) for investments in the states from being treated as incentives for funding.

“A well-crafted law does not have a plan B. These things can no longer happen in Brazil,” said Haddad shortly before having lunch with the Minister of Foreign Affairs, Mauro Vieira. The meeting dealt with the preparations for the official trip to China, which will take place next week.

According to the Minister of Finance, the provisional measure, which is part of the package to raise government revenues and fulfill the promise of zeroing the primary deficit next year, will separate the tax benefits destined to the states according to the purpose: funding (expenses with maintenance of the public machine) or investment (works and purchases of public equipment).

“No country that I know subsidizes funding. We are going to separate the funding from the investment and provide transparency (to the Union’s fiscal incentives)”, he declared.

Box

The government intends to reinforce cash by R$ 130 billion by changing the relationship with state governments in relation to the collection of the Social Contribution on Net Income (CSLL) and the Corporate Income Tax (IRPJ).

In 2017, the National Congress established, through a break up (amendment included in a provisional measure or project unrelated to the original topic), that tax benefits are considered subsidies for investments, with no incidence of Union taxes.

Subsequently, the Superior Court of Justice (STJ) decided that the presumed credits of the Tax on the Circulation of Goods and Services (ICMS), a tax levied by the states, should be excluded from the IRPJ and CSLL calculation base, even if the tax incentives benefit current expenditures. The federal government understands that the change generated a loss of R$ 130 billion for the federal coffers.