“Tax reform has to be now”, argues Alckmin

The acting President of the Republic and Minister of Development, Industry and Commerce, Geraldo Alckmin, assessed this Tuesday (20) that the window of opportunity for approving the tax reform is now, and that the text, to be discussed in the form of a a constitutional amendment, has to be discussed and approved later this year.

“I think the president (of the Chamber of Deputies) Arthur Lira put it well, the debate is mature and it has to be now, it cannot miss the first year (in office). Constitutional reform, PEC, has to be in the first year. miss the first year, you start to have difficulties”, he said during an event on tax reform and industry, held in Brasília. Alckmin is in the exercise of the Presidency of the Republic this week, during President Luiz Inacio Lula da Silva’s trip to Europe.

According to Alckmin, there is a willingness of the country’s main political agents, including President Lula himself, the Minister of Finance, Fernando Haddad, and the Presidents of the Chamber and Senate. For the vice president, a tax reform that drastically simplifies tax collection will reduce legal disputes and make industrialized products in the country more competitive. “If we take the European Union, the tax legal discussion is 0.27% of GDP (Bruno Domestic Product). In Brazil, it is almost 20%”, he observed. He called the country’s tax system a “tax madhouse”.

The acting president also defended measures to reduce bureaucracy in business and spoke of the need for Mercosur to expand trade agreements. “Mercosur only has agreements with Israel and Egypt, it is very isolated,” he commented. Alckmin still criticized the country’s interest rate, which practically prevents Brazil from being competitive abroad.

“Cost of capital. If I pay 10% real interest, and my competitor, his interest is negative, as it is today in the European Union and the United States, how am I going to compete?”, he questioned.

Reform guidelines

Two weeks ago, deputy Aguinaldo Ribeiro (PP-PB), rapporteur for the proposal in the Chamber of Deputies, released the report of the working group, coordinated by him, who spent the last three months discussing the proposed tax reform. According to Ribeiro, who did not present a proposal, but the group’s guidelines, the idea is to vote on the first phase of the reform, which aims to simplify taxation on consumption, in the first week of July. The substitute project to be presented will unify the two proposals on the subject of stops in the House and Senate.

One of the guidelines presented is the creation of a general tax on consumption and another on specific goods harmful to health and the environment, replacing the IPI, PIS, Cofins, ICMS and ISS.

This new tax on consumption should have a dual regime, divided between the Union and the states and municipalities. The forecast is that there will be a standard rate, allowing for variations for specific goods and services.

The group also envisions a cashbackthe refund of part of taxes for low-income families.

Another measure is the creation of a development fund to reduce regional inequalities and encourage the maintenance of enterprises in less developed locations, which will no longer benefit from extinct taxes.

The group also recommends that, for the financial system, there is no reduction in the tax burden. The maintenance of the tax regimes established by the constitution was also defined: the Free Zone of Manaus and the Simple System. A transition to the new model involving the Union, states and municipalities will still be defined.

The discussion on taxation of income and assets will be held separately, with forecasts to take place in the second half of the year, in another effort by the Chamber of Deputies.