Instituto dos Advogados de SP released a document criticizing the text presented by the rapporteur in the Chamber, Aguinaldo Ribeiro (PP-PB)
O Iasp (Institute of Lawyers of São Paulo) claimed to be “at least debatable” that the tax reform project be voted by the Chamber a few days after the presentation of the rapporteur, deputy Aguinaldo Ribeiro (PP-PB).
The institution stated that the debate on the text “not mature enough” to be analyzed in plenary and asks for more time for the proposal to be discussed.
The President of the Chamber of Deputies, Arthur Lira (PP-AL), stated that the reform will be voted by the House until July 7. Last Thursday (June 22), the rapporteur Aguinaldo Ribeiro presented his opinion on the text.
Read below the main points that the Iasp document addresses:
DUAL VAT & AUTONOMY OF THE STATES
Among the guidelines in the text presented by Ribeiro, are that IPI (Tax on Industrialized Products), PIS (Social Integration Program), Cofins (Contribution for the Financing of Social Security), ICMS (Tax on Circulation of Goods and Services) and ISS (Tax on Services) are simplified in the dual IVA (Value Added Tax) for goods and services, with a federal taxation, which would unify IPI, PIS and Cofins, and another state/municipalwhich would unify ICMS and ISS.
The project proposes the creation of the federal tax CBS (Contribution on Goods and Services) and the IBS (Tax on Goods and Services) divided between states and municipalities. The report establishes that a supplementary law will establish the measures.
Iasp says that the proposed model “does not have the necessary decentralization for it to be truly dual”. He also claims that the guidelines undermine the autonomy of states.
“In this context, the substitute removes the power of the States to dispose of their own taxes and to take care of sufficient resources for the execution of their objectives”says the institution in the document.
FEDERATIVE COUNCIL
The project presented by Aguinaldo proposes the creation of a Federative Council to manage the collected resources, with the participation of the Union, States and municipalities. The agency would be responsible for receiving the taxes collected and distributing them.
The Iasp claims that the text is vague in that it leaves to a complementary law the criterion for the distribution of votes or the type of majority required for the approval of deliberations.
“In practice, everything indicates that the council will function as a society, that is, all sensitive issues will depend on an agreement between the States and the 5570 Municipalities, with no guarantees that they will effectively have a voice in this body. Thus, decisions that all these entities can currently take individually will depend on mutual agreement, being certain that, in the divergences that will arise, minorities will have to bow to majorities”says the document.
By mentioning the fact that the functioning of the Council will also be decided later, the lawyers question what criteria will be used for the number of votes for each entity. Whether population, economic or mixed.
IBS RATES
The lawyers’ document also talks about the “false power” of federative entities to fix their IBS rates. The opinion presented by the rapporteur establishes that all administrative matters relating to the IBS will be decided within the Federative Council.
“The entity could only change its rates for all goods and services, and it is forbidden to apply a reduced rate or zero rate for any product, which makes the spectrum of situations in which increases and decreases are possible marginal. After all, by having to raise or lower rates for all operations at the same time, either the entity will discourage domestic consumption or it will end up producing intolerable impacts on revenue (reductions)”says an excerpt.
INCOMPATIBILITY WITH OTHER COUNTRIES
One of the proposals of the tax reform is to correct the problem of the different tax rates on consumption. The institute of lawyers argues, however, that “between this tangle and the impossibility of variations” there is a balance to be created.
“The IBS [Imposto sobre Bens e Serviços] it must have few taxation bands, but with reasonable flexibility, to allow calibration of the tax burden. This is, after all, the practice adopted by most OECD countries. [Organização para a Cooperação e o Desenvolvimento Econômico]such as the members of the European Union”mentions another excerpt from the document.
Iasp also says that the situation “gets worse” because the project proposes an intermediate rate for items such as education, health and food in the basic basket, and in other countries “either not taxed or at much lower rates than intended” in Brazil.
SELECTION TAX
The lawyers’ document also discusses the proposed excise tax, which, according to the project, should focus on products and services that harm health or the environment.
According to the Iasp, the Union will have control “excessive” about the country’s taxation, because the federal government would materially legislate not only on CBS, but also on IBS.
The institute also states that the term placed in the text of the tax rapporteur on products and services “harmful to health or the environment” allows different interpretations.
“In this sense, there is no criterion of distinction clear enough to extremize what can and what cannot become the object of the tax”says an excerpt from the document.
The lawyers’ argument is that in countries belonging to the OECD, selective taxes fall on specific products, such as tobacco, alcohol, fossil fuels and energy from non-renewable sources, soft drinks and foods with high levels of sugar.
“This highlights the need for precision regarding its scope”says the Iasp report.
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