![](https://i3.wp.com/static.poder360.com.br/2024/01/CongressoNacional-Fachada-Cupulas-Senado-CamaraDosDeputados-5-848x477.jpg?w=1200&resize=1200,0&ssl=1)
Heads of State invited to work group on reform; they are also expected to request adjustments to IBS oversight
Governors were invited to participate this Tuesday (2.Jul.2024) in a public hearing of the working group that regulates the consumption tax reform. In negotiations with congressmen, one of the central demands of the States is the maintenance of the tax substitution –regime in which the tax is collected at the beginning of the production chain.
The replacement is not established in the complementary bills regulating the PEC (Proposed Amendment to the Constitution) 45 of 2019. The mechanism is well-received by the Federation units because it facilitates inspection. There are fewer industries producing at the beginning of the chain than establishments that distribute the product to the end consumer.
The public hearing is scheduled to be held at the Chamber of Deputies at 2:00 p.m. The full list of guests can be read here here.
In addition to discussions about the replacement, the governors are also looking for a way to make the text clearer about the monitoring of the new taxes created by the reform.
VAT (Value Added Tax) is made up of two other taxes. The rates estimated by the Ministry of Finance are:
- 17.7% – IBS (Tax on Goods and Services), which goes to States and municipalities;
- 8.8% – CBS (Contribution on Goods and Services), which goes to the Union.
Despite this, taxes are issued in a unique manner. State representatives want to ensure that they will still have the authority to oversee the process without any overlap with the Union.
The members of the working group will wait for the states’ demands before finalizing the text. They will be even more cautious in the case of the supplementary bill. 108 of 2024which deals with the IBS Management Committee.
A final version should be finalized on Tuesday night (July 2) to be formally filed the following day (Wednesday). The next step, in the case of the steering committee’s project, is to take it for reassessment by the Treasury’s technical team. If there is any other pending issue or more serious disagreement, the demand will be taken to the minister. Fernando Haddad (Farm).
THE REGULATION
On April 24, Haddad personally delivered the main text of the tax regulation to the presidents of the Chamber of Deputies, Arthur Lira (PP-AL), and the Senate, Rodrigo Pacheco (PSD-MG). The 2nd text was released in June.
In total, there will be 3 texts: 2 complementary bill projects (these are already with Congress) and 1 ordinary bill.
The complementary ones will deal with:
- the specifications common to the IBS (Tax on Goods and Services) and the CBS (Contribution on Goods and Services) – contains definitions of all specific and differentiated regimes of federal, state and municipal taxes. It also discusses selective taxes;
- IBS specifications only – will define the format of the tax management committee. It addresses the transition from the current ICMS (Tax on the Circulation of Goods and Services) to the new rate.
The third text – in the form of an ordinary law – should detail how the transfer of resources to the Regional Development Fund will be made as compensation for tax benefits. This will also be done later.
Here are the differences between the texts:
- bill – legislative proposal that can create, amend or repeal laws;
- ordinary bill – deals with general matters and requires a simple majority for approval;
- complementary bill – regulates specific topics provided for in the Constitution and requires an absolute majority for approval.
UNDERSTAND TAX REFORM
In short, the main change proposed by the consumption tax reform is the creation of VAT (Value Added Tax) to unify a series of tax rates. The objective is to simplify the collection system in Brazil.
The change is expected to come into effect by 2033. It was instituted through a PEC (Proposed Amendment to the Constitution), approved by the National Congress in December 2023.
Brazil has 5 taxes on consumption that will be unified by VAT:
- IPI (Taxes over industrialized products);
- PIS (Social integration program);
- Cofins (Contribution to the Financing of Social Security);
- ICMS (Tax on the Circulation of Goods and Services);
- ISS (Tax over services).
Dual VAT will consist of:
- CBS (Contribution on Goods and Services) – the merger of IPI, PIS and Cofins. It will be managed by the Union (federal government);
- IBS (Tax on Goods and Services) – unifies ICMS and ISS. It will have shared management between states and municipalities.
O Poder360 prepared a report that explains in detail the tax reform and the changes it will bring to citizens’ daily lives. Read here.
#Brasília #governors #negotiate #tax #replacement