Source Agorarn
Unofficial translation:
Special advisor to the Minister of Economy, Paulo Guedes, Guilherme Afif Domingos says that the first stage of the tax reform that will be delivered to Congress next Tuesday (21) is just the first step in a broader project. In the first phase, the government will only propose the unification of PIS and Cofins in a single tax , called the Contribution on Goods and Services (CBS), which would have a 12% rate.
The unification of federal taxes has been discussed for years, but it costs to leave the paper because it is not considered advantageous for the service sector, which accounts for more than 70% of GDP. In this model, billing is made throughout each stage of the production chain.
In the case of the service sector, it does not have the same advantages because the highest cost is labor, which does not generate tax credit. In general, unification is advocated with the argument of reducing bureaucracy and cost of companies by facilitating tax collection.
In a later step, which would depend on the return of the face-to-face sessions in Congress – still with no date to happen -, the government intends to create a new tax on electronic payments , which is subject to criticism by parliamentarians such as the Mayor, Rodrigo Mai a ( DEM-RJ), who commented on the matter saying that he would redeem the “Xô, CPMF” campaign, for seeing similarities with the old check tax. At this stage, the government also intends to present to parliamentarians the Renda Brasil program , which should replace Bolsa Família. For now, Congress sessions are held only remotely.
Asked why the government opted for a sliced reform, Afif compared the change in the country’s tax system to an ox:
“Because an ox swallows its steaks. If you want to swallow a whole ox, you can pin it or regurgitate. We can’t go wrong. We need to base, know the stages of entry, because a large project like the tax reform will have many conflicts within Congress, mainly with problems of states and municipalities. We are taking the first step as proof of goodwill ”.
To overcome resistance in Congress only to unification of taxes, the government will propose the exemption of companies’ payroll, now taxed at 20%. This same promise has been made to parliamentarians in exchange for supporting the president’s veto to extend the exemption from 17 sectors that are major employers in the country.
These activities do not fail to pay tax, they just adopt another tax model, considered more compatible. The extension of the measure for one year had been included in Provisional Measure (MP) 936 , which allows for a reduction in working hours and wages or temporary contract suspension, in an attempt to keep jobs in the face of the impact of the new coronavirus pandemic on the economy .
But to pay for a general exemption, it is necessary to generate revenue. The government’s way out is the creation of the new tax on electronic payments. Government calculations point out that a rate of 0.2% would generate revenue of R $ 60 billion. The other percentage under analysis, 0.4%, would result in revenue of R $ 120 billion.
“We will choose how much we will take on the payroll, from those who earn up to one minimum wage, up to two minimum wages, or take the contribution from the entire payroll. For that, we will have to graduate this new tax that would come to replace the payroll tax base ”explained Afif.
Experts say the debate over changing the country’s tax system is a long process, requiring political capital and negotiating with parliamentarians. The mere unification of taxes has been discussed in recent years, but it never left the paper.
The change proposed by the economic team is even more comprehensive. Asked if there could be a mismatch between the ambition of the government’s proposal and the need to keep jobs at a time when economists estimate that the country will face the biggest recession in 120 years, Afif said the changes may not be approved overnight. .
“What you are offering is the debate. Or do you think this will be approved at the touch of a button? Will not. It is more complex. You even have to wait for Congress to return in person to present the matters that depend on changes to the Constitution ”.
In addition, the government is still discussing the tax base of the new tax.
“I defend the largest possible base. It takes everything because it follows the principle of proportionality and not progressivity. Handled little, paid little, moved a lot, paid a lot. It is a very easy base for you to capture, without increasing the tax burden. It will finance Social Security and minimum income social programs, ”he said.
IR changes
Guedes’ aide rejects comparisons with the old check tax:
“It is not the same CPMF. She is 12 years ago, the check tax. Here, you have a much broader base that will also reach the financial system, the Stock Exchange, everyone “, he said, and added in response to Maia’s comment:” We are going to do the campaign “xô, tax on payroll ”.
According to Afif, the tax reform should include changes in the Income Tax for individuals and companies in the future. In the case of legal entities, the idea is to reduce the collection and adopt tax on profits and dividends:
“You give the prospect that it will go down, for example, (the rate) from 34% to 23%, but in a period of seven years, there is time to make the necessary equalization”.
For individuals, according to Afif, there are “excess deductions” that need to be analyzed, as a way to increase the exemption ranges.
“We are going to decrease deductions and increase the exemption base, that is, correct the base that is uncorrected”.
Afif ruled out tax on large fortunes:
“Whoever did it broke his face. You see France, which went into it, what went out of capital. This is left-wing dialectic ”.
