Tax Rule II: What should be the X value of the cap in the initial reporting year; read article

The text is part of a series of three articles with ideas on the rule that will be proposed by the government

A previous article discussed what should be the attitude that the government should have with respect to the so-called “tear”, in the regulation that it should propose to the Congress In the next months.

In order to contribute to this debate, this is part of a series of three articles with ideas about it. Today’s article will deal with the “X of demand”, i.e. what the X value of the ceiling should be in the initial reference year, which is assumed to be 2024. In our next meeting we will deal with the proposed rule of variation from the ceiling from 2025 on.

The proposal is that the law that will be proposed by the government considers a forecast expenditure hypothesis for 2023 of R$ 1,980 billion and signals an initial reference value of 2024, with four components: expected inflation for 2023, of 6% ; real growth of 1%; a precautionary adjustment of 0.5% to take into account any deviations between expected and actual inflation; and a plus in the order of 20 billion reais, to regularize the value of the flow of precatorios, canceling the aberration committed with the Proposal to Amend the Constitution (PEC) of Precatorios, of 2021, baptized at the time by the press as ” PEC do Calote”.

The result of this multiplication is an expenditure of BRL 2.15 trillion in 2024. Therefore, it is suggested that the legislative proposal sent by the Executive to Congress explicitly states this global expenditure ceiling in 2024, without the “tricks” of the current “extract” .

Considering a possible expenditure of 10 billion reais with “normal” extraordinary credits, a Gross Domestic Product (GDP) of 10.5 trillion reais in 2023 and, for 2024, GDP growth parameters and change in the implicit deflator of 1 .5% and 5.0%, respectively, we would have a potential expenditure of BRL 2,160 billion in 2024 and an estimated GDP of BRL 11,190 billion. That is, spending would be 19.3% of GDP, the same level as in 2018, at the end of the government of Michael Temer.

The difference is that at that time the central government’s net revenue was 17.6% of GDP, while in 2022 it had already reached 18.9% of GDP, even under the liberal management of Paulo Guedes, which is why it would make sense aspire to aim to maintain this value in 2024, which would leave us with a primary deficit of the Union equal to 0.4% of GDP, likely to turn into a surplus even in the current government.

From there, it would be necessary to have modest and lower-than-the-economy spending growth to reduce the spending-to-GDP ratio again, as between 2016 and 2022.

Continue in the third and final chapter, in two weeks. L

*Fabio Giambiagi is an economist

Source: Terra

Rose

Rose James is a Gossipify movie and series reviewer known for her in-depth analysis and unique perspective on the latest releases. With a background in film studies, she provides engaging and informative reviews, and keeps readers up to date with industry trends and emerging talents.