Deputies fail to reach an agreement on including food in the basic food basket; wing fears that the final tax rate will have to increase
The exemption from taxes on meat has become the target of a stalemate between members of the GTs (working groups) of the Chamber of Deputies for the regulation of tax reform, according to the Poder360.
The deputies have been meeting since 9:30 am this Wednesday (3.Jul.2024) at the RO (Official Residence) of the President of the Chamber, Arthur Lira (PP-AL), in Brasilia. They they did not reach an agreement about the texts that will be presented.
One wing believes that granting the tax benefit will increase the final dual VAT (Value Added Tax) rate from 26.5% to around 30%. The meeting It’s been going on for more than 5 hours.
There is a political cost to the government of Luiz Inácio Lula da Silva (PT) if meat is taxed. The president campaigned in 2022 saying that picanha would return to the tables of the poor. More taxes would make the product more expensive.
THE REGULATION
On April 24, Finance Minister Fernando Haddad personally delivered the main text of the regulation of the PEC (Proposed Amendment to the Constitution) of tax reform (45 of 2019) to the presidents of the Chamber of Deputies 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 3rd text – in the form of an ordinary law – must detail how the transfer of resources to the Regional Development Fund will be made as compensation for tax benefits.
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.
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