Lira shows strength and the Chamber approves the 1st PLP that regulates taxes

The Chamber of Deputies approved this Wednesday (10.Jul.2024) by 336 votes to 142 the main text of the regulation of tax reform. There were two abstentions. The PLP (Complementary Bill) 68 of 2024 deals with the unification of taxes to create the IBS (Tax on Goods and Services) and the CBS (Contribution on Goods and Services), to form the dual VAT (Value Added Tax). Read the full of the report (PDF – 2 MB).

The approval before the congressional recess, which begins on July 18, showed the political strength of the Speaker of the House, Arthur Lira (PP-AL). The congressman assured the Finance Minister, Fernando Haddadwhich would vote on the proposal this Wednesday (10th July).

Now, the deputies are analyzing highlights (suggestions to the text). Among them, there is an amendment to the PL to completely exempt meat from the standard tax rate.

Even though congressmen were interested in moving forward with tax regulation, impasses on key points of the project, especially the exemption of meat from the basic food basket, made it difficult to reach an agreement.

As anticipated by the Poder360the PL, with the largest bench in the Chamber, and other opposition parties advised against the project. Novo followed the same line. The deputies argued that they did not have time to read the hundreds of pages because the latest version of the PLP was filed during the vote.

Lira sought to resolve points of divergence during the early hours of Wednesday (10 July) and continued negotiations throughout the morning and afternoon.

Haddad had said on Tuesday (9th July) that the “intention” to vote during the week was the “better possible”but signaled pending issues.

Lira was the articulator of the approval of the PEC (Proposed Amendment to the Constitution) 45 of 2019who created the reform. During the day, he spoke with leaders and deputies from different benches.

The congressman wants to leave the presidency of the Chamber in 2025 with the change in the tax system as his legacy. The agenda has been under discussion for over 3 decades and has not advanced in other legislatures.

“Once again, I would like to highlight the quality, willingness and bravery of all the parliamentarians in this House who, whether they agreed or disagreed, faced the discussion and vote on a matter like this”said the president of the Lower House in plenary.

MEAT & ZERO TAX

Despite pressure from sectors and some members of Congress, beef was left out of the list of foods with full exemption from the new taxes. Therefore, it was included in the list of products with a 60% reduced rate.

This specific aspect of the text was similar to what was sent in April in the complementary bill of law Ministry of Finance. Haddad signaled support for the partial reduction.

The Treasury’s central claim regarding protein concerns the impact on the standard tax rate. The more products that are fully exempted, the higher the VAT rate would have to be, to compensate for the loss in revenue.

The economic team estimated in April that the total exemption would raise the standard rate from 26.5% to 27.1%.

On the other hand, meat without a full tax reduction brings a political cost to the government. Luiz Inacio Lula da Silva (PT). The PT candidate campaigned in 2022 saying that picanha would return to the tables of the poor. According to the tax bill prepared by his team, there was a reduction. However, it could have been greater.

The PT member has also publicly defended total exemption. “There is another type of meat that people eat. I won’t go into detail, because there are a lot of important people working on this. But I think we need to include meat in the basic food basket, yes.”declared to Radio Society on July 2nd.

As shown by the Poder360the federal government’s divergent discourse regarding the total exemption of meat in the regulation of tax reform has created a stalemate in the Chamber of Deputies. According to this digital newspaper, the opposing positions of different wings are hindering the negotiations for the PLP vote.

DRINKS & “SIN TAX”

The Selective Tax, known as the “sin tax”, will be levied on alcoholic beverages and will be charged in stages from 2029 to 2033.

The idea is that the tax incorporates, for this category, the difference in the ICMS rates (Tax on Operations related to the Circulation of Goods and on the Provision of Services) and the selective modal percentage.

The project establishes that taxation can be carried out through an estimate on a set of alcoholic beverages or differentiated depending on the product.

Congressmen also proposed do not condition “the setting of Selective Tax rates to maintain the tax burden of the sector or of a specific category of beverages”.

The gradation must consider both the alcohol content and the volume of the drink, as had already been established in the 1st text sent by the GT (working group).

The specific value of the rates will be published later, in the form of an ordinary lawas is the case for the percentages applicable to the “sin tax” in its entirety.

The Selective Tax was created as a way to reduce the consumption of products considered harmful to health or the environment. It also increases revenue.

Cigarettes, sugary drinks and other types of beverages continue to be subject to the tax, as previously stipulated.

Read below other changes to the Selective Tax presented in the report this Wednesday (10th July):

• mineral goods – the tax rate on the product is limited to 0.25%, including coal. In general, it is set at a ceiling of 1%;
• electric vehicles – codes for electric cars and golf carts have been added to the incidence;
• cars – the possibility of a car, for example, being intended for a taxi driver or a person with a disability was included as a criterion for the gradation of the rate that will be applied to the product.

CASHBACK

The mechanism works as a way to return part of the tax charged on certain services and products to the population that earns up to half the minimum wage. Those who are eligible will automatically enter the system cashback.

The money will be returned when services such as electricity and water bills are charged. The percentage that goes back to the consumer will work as follows:

• purchase of a 13 kg cylinder of liquefied petroleum gas – 100% cashback for CBS and 20% for IBS;
• supply of electricity, water, sewage and natural gas – 100% for CBS and 20% for IBS;
• other cases – 20% for CBS and IBS.

MEDICINES

The approved text determines a 60% reduction for all medicines registered with Anvisa (National Health Surveillance Agency) or produced by compounding pharmacies, except those that will have a zero rate on the IBS and CBS charges.

The inclusion of all medicines was made in the 1st report released this Wednesday (10th July) and remained in the final project.

“This is an important improvement to guarantee access to healthcare for the population”said the text’s rapporteur, deputy Reginaldo Lopes (PT-MG).