Minister said that continuity of the benefit was not foreseen in the Budget and that “high-level discussion” will begin
The Minister of Finance, Fernando Haddadsaid this Monday (January 15, 2024) that the government's economic team will take to the president of the Senate, Rodrigo Pacheco (PSD-MG), the new calculations on the waiver of payroll tax relief for 17 sectors in 2024.
According to Haddad, Congress will receive, for the first time, the study of what was approved and is not foreseen in the Budget. He declared that the Executive Branch was not consulted on the proposal to continue the exemption. The meeting with Pacheco should be held at 6pm this Monday (15th January).
The Treasury survey will include a reduction in the municipalities' social security contribution rate.
Haddad said that by taking the study to Pacheco, there will be the beginning of a “high level discussion”. The project was approved with estimates from Congress itself.
“I asked the IRS to reestimate it. The first step I will take is to inform President Rodrigo Pacheco of what is not foreseen in the Budget and was approved”, declared Haddad.
“As the calculation was not made by the Treasury and the project was approved without the participation of the Executive –which even considered the proposal unconstitutional–, We used this time to make an estimate of waivers not foreseen in the Budget that compromises the intended objectives”he completed.
The minister was asked about the values, but preferred not to answer: “I'll take it to him [Pacheco]”. Haddad signaled that maintaining the tax benefit would be a lack of commitment to the Budget approved in Congress for 2024.
Asked whether federal taxation on purchases of up to US$50 in e-commerce international, Haddad declared that he spoke with Pacheco “sometimes” and who read news about “commitment to the approved Budget”.
“For us, the important thing is this: finding an alternative to the approved Budget and preventing the capture of interest groups by the public Budget. When you make a tax exemption you have to compensate. Naturally, there are lobbies and interest groups defending their proposals”, declared the minister.
TAX IMPACT
Payroll tax relief is expected to cost R$9.4 billion in 2024, according to the Ministry of Finance. The value is the same as that projected for 2023. The most recent data from the Federal Revenue Service shows that the waiver cost R$7.36 billion from January to November.
The payroll tax relief project will have an additional cost in 2024 for a reason that has no relation to the 17 sectors. The text changed the social security contribution rate from 20% to 8% for municipalities with up to 142 thousand inhabitants. The fiscal impact will be R$9 billion, according to the government, which will bring the total waiver of the text to R$18.4 billion.
The Minister of Finance, Fernando Haddad, said in December that the bill, instead of R$18.4 billion, would be R$25 billion. He didn't explain the reason. O Power360 contacted the economic team also in December 2023 to obtain an explanation, but there were no responses until this Monday (15 January 2024) regarding the real impact of the measure.
The exemption covers 17 segments of the Brazilian economy. The list is varied and includes sectors such as footwear, textile industry, communications, information technology, road transport, call center and civil construction.
Here is the infographic with the benefited sectors:
WHAT THE GOVERNMENT WANTS
The Ministry of Finance considers “unconstitutional” the payroll tax relief. It is based on a provision in the Constitutional Amendment for Social Security Reform, enacted in 2019. The text prohibits, in the Treasury's view, the extension of the tax benefit.
Firstly, Haddad said he would call the STF (Supreme Federal Court) to review the issue – a possibility that has not yet been ruled out. Afterwards, he adopted a set of measures and the gradual reinstatement of the payroll, the MP. 1,202. Among the actions announced are:
- reduction of the employer's quota on the payroll – the rate will be 10% to 15% (currently 20%) on up to 1 minimum wage (R$ 1,412) and will benefit companies that are part of one of the 42 economic activities covered in a provisional measure to be published;
- gradual extinction of the Perse (Emergency Events Sector Resumption Program);
- annual limitation on offsetting tax credits obtained for companies by court decision – will include credits above R$10 million and in up to 5 years.
The special secretary of the Federal Revenue, Robinson Barreirinhas, said that the MP must guarantee R$20 billion in revenue in 2024. The text is seen as fundamental for the government to be able to close this year's accounts. Haddad said it will be a “problem closing the Budget” with the exemption.
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