Tax on products harmful to health is foreseen in the reform

As with dual VAT, the rate of the Selective Tax will be determined after the tax reform. For cigarettes and alcoholic beverages, there should not be major price changes, because these products, for decades, have paid large rates of Tax on Industrialized Products (IPI), as a public health policy.

For other products with health and environmental risks, the Selective Tax will result in higher prices.

The inclusion of pesticides and agricultural defensives, however, will still be discussed in a supplementary law. To facilitate the approval of the tax reform by the ruralist caucus, the government agreed to exclude agricultural inputs from the Selective Tax, including pesticides, which benefit from the VAT rate reduced by 60%.

legacies

Currently, inheritances and donations in Brazil pay the Causa Mortis Transfer and Donation Tax. Each state defines the rate, but the average tax corresponded to 3.86% in 2022, without progressivity (higher rates for larger inheritances) in most states.

In addition to establishing the progressive rate, so that the richest families pay more, the tax reform will allow charging on inheritances and donations from other countries.

To facilitate the negotiations, however, the rapporteur Aguinaldo Ribeiro exempted the transmission to non-profit entities with purposes of public and social relevance, including charitable and charitable organizations of religious entities and scientific and technological institutes. A complementary law will define the conditions for these exemptions.

Cashback

The reform provides for the possibility of cashback, partial return of the dual VAT to the poorest, to be defined by means of a complementary law. It is not yet clear whether the mechanism will only cover families registered in the Single Registry for Social Programs of the Federal Government (CadÚnico) or whether there will be a higher income limit, such as families with incomes of up to three minimum wages.

In a public hearing at the Chamber of Deputies in March, the Extraordinary Secretary for Tax Reform at the Ministry of Finance, Bernard Appy, presented suggestions on how would this refund happen? . According to the Extraordinary Secretary for Tax Reform, the cashback could be based on the Individual Taxpayer Registration (CPF) issued on the invoice, with the purchase price and registration in the Single Registry being crossed to authorize the return.

Appy cited the example of Rio Grande do Sul, which implemented a refund system of the Tax on the Circulation of Goods and Services (ICMS) in 2021 for families registered in the Cadastro Único with income of up to three minimum wages through a credit card .

Initially, the government of Rio Grande do Sul refunded a fixed amount per family and has now started to refund per CPF, based on crossing data between the purchase price and the family’s registration status. In remote locations, without internet access, the Extraordinary Secretary for Tax Reform suggested a direct income transfer system, complementary to Bolsa Família.