President of the Lower House states that exemption for meat is a “heavy price” to pay; text will be presented on Thursday (4.Jul)
The President of the Chamber of Deputies, Arthur Lira (PP-AL), stated this Wednesday (3.Jul.2024) that the main project to regulate the tax reform should maintain the final VAT (Value Added Tax) rate at 26.5%, as suggested by the government, but that it can also be reduced. The text will be presented on Thursday (4.Jul.2024), at 10 am.
“We have limits to maintain a tax rate level that is as low as possible. It came from the government at around 26%, if we can, we will reduce it or maintain it. But our job is to reduce the general tax rate for everyone.”said the deputy.
The main impasse over the rate lies in the tax exemption for meat, which the president’s government Luiz Inacio Lula da Silva (PT) wants inside the basic basket.
Party leaders and the 7 members of the working group on the text spent more than 7 hours at the official residence of the Speaker of the Chamber this Wednesday (3 July), from 9:30 am to 5 pm.
During the meeting, the deputies discussed alternatives to increase federal revenue without impacting the final tax rate. One of the solutions considered was the inclusion of weapons in the so-called “sin tax,” which imposes a surcharge on items considered harmful to health and the environment.
Read more:
Lira demonstrated that there is difficulty in introducing meat into the basic food basket, as it would result in an increase in the tax rate for the end consumer, but he sought to minimize the impasse.
“There is no controversy regarding meat. There has never been protein in the basic food basket, there never has been, but if it is appropriate, we have to see how much this inclusion represents in the tax rate that everyone will pay.”.
According to the deputy, “just the meat” results in an impact of 0.57 percentage points. “I think it’s a heavy price for all Brazilians”he declared.
The regulation
The Minister of Finance, Fernando Haddaddelivered on April 24 the main text of the regulation of the PEC (Proposed Amendment to the Constitution) of tax reform (45 of 2019) personally 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.
Understand tax reform
In short, the main change proposed by the consumption tax reform is the creation of VAT to unify a series of tax rates. The objective is to simplify the collection system in Brazil.
The change should come into effect by 2033. It was instituted through a PEC, 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.
#Lira #Chamber #reduce #maintain #tax #rate