The Ministry of Economy rebutted calculations released yesterday that municipalities and states would lose revenue with the approval of the income tax reform, approved by the Chamber of Deputies. In the communiqué that presents its arguments, the government, however, admits loss to the three entities of the Federation, in line with what the Special Secretary of Treasury and Budget, Bruno Funchal, said yesterday about what the reductions for the Union would be. with the changes, around R$ 20 billion.
The National Confederation of Municipalities (CNM), which declared its support for the reform, yesterday expressed its “dissatisfaction and perplexity” with the result of the vote, argued that municipalities will have a reduction of R$9.3 billion and promised to work for changes in the text in the Senate.
According to the Economic Policy Secretariat (SPE) for the Economy, the increase in tax revenue is transformed into a reduction in taxes “for everyone”. “Assertions that states and municipalities will have a drop in revenue with Bill 2,337, which deals with changes in the Income Tax, recently approved in the Chamber of Deputies, are not valid,” he guaranteed in a statement.
For the SPE, the project preserves public accounts while bringing the Brazilian tax system closer to that of developed countries. “The federal government does not want an increase in the tax burden. At the same time, given the fiscal scenario and the commitment to consolidating public accounts, it is essential to maintain the current levels of collection of federal entities”, he argued.
The Ministry of Economy’s line of reasoning takes into account a “significant increase” this year in federal collections and mentions the Federal Revenue’s forecast that 2021 will close with an additional collection of around R$ 200 billion. This volume is disputed by some analysts, as it would be overestimated in relation to currently existing projections for the growth of the Gross Domestic Product (GDP).
According to SPE’s accounts, approximately R$110 billion of this increase is structural. The Secretariat calculates that R$ 87.4 billion are from Income Tax. Of this amount, R$ 58.5 billion are structural (66%). Of this structural gain, 24.5% is allocated to the Municipal Participation Fund (FPM), in the amount of R$ 14.33 billion, and 21.5% to the State Participation Fund (FPE), of R$ 12. 58 billion. These resources, emphasized the note, will be permanently incorporated into the cash of cities and federation units.
The Ministry of Economy pointed out that, instead of the government using this excess of collection to increase public spending, part of these resources will be “returned to the Brazilian citizen and to companies”. According to the Revenue, it would be BRL 23.1 billion in 2022, BRL 10.5 billion in 2023 and BRL 13.3 billion in 2024. The States will transfer BRL 11.2 billion in 2022, BRL 7.4 billion in 2023 and BRL 8.7 billion in 2024, and municipalities, BRL 12.8 billion in 2022, BRL 8.5 billion in 2023, and BRL 10 billion in 2024. “The structural gain of tax collection of income more than offsets the return promoted by the tax reform for the next year and for the next ones”, states the note.
The forecast of this “return” in 2022, therefore, considers a total of R$ 47 billion, with R$ 24 billion of them from States (R$ 11.2 billion) and municipalities (R$ 12.8 billion). The difference is equivalent to about US$ 20 billion cited by Funchal yesterday in losses to the Union. “In the pandemic, the Federal Government guaranteed the transfers to the States and municipalities, in the growth, it is necessary to share the gains with the population and companies ”, justified the SPE.
Also according to these calculations by the ministry, the volume of federal income tax that will be transferred to states and municipalities next year will be at least as high as this year’s. The statement recalled that, from January to July, R$ 337.4 billion were collected with the IR – a real increase by the IPCA of 21.62% compared to the same period of the previous year.
With the Tax on Industrialized Products (IPI), the note continues, R$ 41.9 billion were collected (real growth – IPCA) of 36.82% in the seven months. “This has already strongly increased constitutional transfers to states and municipalities in 2021, both in relation to 2019 and in relation to 2020”, he compared. Until August 2021, States and municipalities received R$ 36 billion more in participation funds (R$ 17.2 billion in the FPE and R$ 18.8 billion in the FPM), according to the government.
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