The coordinator of the tax reform working group, Reginaldo Lopes, says that a 5% share of the new federal VAT will be able to feed the fund
BRASÍLIA – The coordinator of the working group of tax reformdeputy Reginald Lopes (PT-MG), said al Stadium that the “starting point” of the negotiations is the transfer of R$ 48 billion a year to the fund that will compensate States and Municipalities for the losses deriving from the collection of the tax reform.
This is the amount that was being negotiated in the last legislature for the tenth anniversary (480 billion rand) of the so-called Regional Development Fund, but which met with resistance from former Economy Minister Paulo Guedes, who saw the birth of the finance an attempt to bleed the Union coffers dry.
According to Lopes, among the proposals to provide the fund is a 5 percent share of the federal value added tax (VAT) (the new one that will be created to replace PIS, Cofins and IPI).
The other option is a combination of a portion of the federal VAT and a percentage of the national “excess” VAT collection, the Goods and Services Tax (IBS). Through the proposed Goods and Services Tax Reform, the IBS will unify the ICMS (state main tax) and ISS (municipal taxes) into a double taxation model: federal and national VAT.
The fund will be created to reduce regional inequalities between states and compensate for the loss of part of the autonomy that governors will have to make to implement economic development policies with the suppression of the power to grant tax incentives to attract new businesses to their own states.
The granting of these tax incentives has fomented tax warfare between states and increased the country’s fiscal chaos in recent decades. During the various attempts to pass the reform, the size of the fund has always been one of the most sensitive issues.
Lopes said there is no set value and stressed that negotiations are still ongoing. But he highlighted the importance of creating the fund to pave the way for the approval of the tax reform.
The PT lawmaker disputed the assessment, growing in Congress and among tax experts, that there is not as much convergence among states as has been disseminated by the government. The governor of Rio de Janeiro, Cláudio Castro (PL), defended last week that the debts of the states with the Union enter the negotiations as a counterpart for the states that lose with the reform.
“What they want is the development fund. A new system, with two goals: make the transition from the end of tax holidays and create a new policy,” he said.
Speaking of incentives Free zone of Manaus, the deputy defended a new development model for the region, but the details are not yet closed. The parliamentarians of the working group will have, in the next 1 and 2 pm, a meeting, in Manaus, in the Free Trade Zone, and with the governors of the northern states.
Differentiated treatment by sector
The request by various sectors for a differentiated treatment of rates is another sensitive point in the negotiations which the coordinator believes has made progress. According to Lopes, the Proposal for Amendment of the Constitution (PEC) 45, under discussion in the Chamber, already solves many of the problems by including in the text the sectors that can receive different treatment: agri-food, freight and passenger transport, education, health and welfare institutions.
“It’s an important watershed that builds consensus for the passage of the tax reform,” he said. These sectors ask that the provision of differentiated treatment be in the Constitution. “This has been great progress. I think it’s the trend,” she said, clarifying that sectors with different treatment should be foreseen in the constitutional text of the report. “It’s a trend for these sectors to have this outlet,” she added.
According to him, one of the points under discussion is whether the complementary law, which will regulate the provisions of the reform, will be presented in parallel with the drafting of the PEC. The other option is to approve the PEC and then start a debate on the different treatment.
The deputy specified that the calibration of the new rates for these sectors with treatment will depend on the calculations being made. “We’re already getting these calculations. You’ll have to do this accounting to make the equilibrium rate,” he said.
According to him, for sectors such as health and education, it could have an equilibrium rate and, at the same time, have a cashback, a tax return mechanism. “It could have two different treatments. But there could be sectors that only have cashback,” he explained.
In his assessment, the cashback system allows for the implementation of some policies, such as gender, social and racial ones: “I’m not saying it will be used, but when cashback is created as an instrument of fiscal progressivity, those people with less economic power will be able to get their resource (the tax) back.
Lopes disputed the criticism that cashback is difficult to implement and considered that 21st century VAT is based on advances in technology that have made it easier to credit, collect and automatically share the tax collection between states. Municipalities and the federal government.
small producer
The coordinator of the reform working group advised that a special program may be needed for small farmers so that they can also receive tax credits for the inputs they buy and sell to further down the chain, such as supermarkets and factories. .
“They buy inputs, equipment, machines with a lot of (embedded) taxes. It will buy for less,” he stressed. He said the reform would put an end to the supposed credit, which currently exists for the industry.
Lopes said he has asked the Finance Ministry to give special treatment to these small farmers.
Dispute between the Senate and the Chamber
For him, the dispute between the Senate and the Chamber on the methods of drafting the Measures (deputies) will not affect the vote on the reform. This is a concern, however, that surrounds supporters of the reform, who see the risk of a repeat of what happened in the Bolsonaro government, when the political dispute over the two amendment proposals also paralyzed discussion in Congress.
Lopes said the House Tax Reform Working Group is in dialogue with senators to align the proposal. The rapporteur for the reform in the Chamber, the deputy Aguinaldo Ribeiro (PP-PB), anticipated and held meetings with the senators.
“There is no dispute over leadership and there is no dispute between the opposition and the government in relation to tax reform,” he reflected. The stance, he said, was collaborative with the mayors of the Chamber, Arthur Lira (PP-AL), and of the Senate, Rodrigo Pacheco (PSD-MG).
According to the coordinator, the remaining differences are minimal compared to the general gain that the approval of the reform will give. “We will solve the problem of past (accumulated) credits, the fiscal war, the Brazilian federal model will be more collaborative, the exporter who cannot get credit will have credit, and Brazilian industry will become more competitive.”
Source: Terra

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