The long-awaited tax reform has been approved by the federal Senate
After years of intense debates, discussions and heated dialogues, we will finally have new rules for the National Tax System – STN. The long-awaited tax reform was approved by the federal Senate in November 2023 and by the Chamber of Deputies on 15 December 2023.
The issue was initiated through the Proposal for Constitutional Amendment – PEC nº 45/2019 and passed through the social control and the formal approval rite of the Federal Senate and the Chamber of Deputies, having been the subject of numerous opinions, amendments, requests and demonstrations by several parliamentarians.
The main foundations of the tax reform were to grow the Brazilian economy in a sustainable way, generating jobs and income; make our tax system fairer, reducing social and regional inequalities; and reduce the complexity of taxation, ensuring transparency and providing greater fiscal citizenship.
The main line of the approved reform is based on two major initiatives. The first is the reform of consumption taxes. To this end, it abolishes five taxes – ISS, ICMS, IPI, Cofins and the Contribution to the PIS – and authorizes the establishment of two, one with revenues destined for the Union (Contribution on Goods and Services – CBS) and the other with revenue allocated between States and Municipalities (Goods and Services Tax – IBS).
The second is the authorization to create the Selective Tax (SI), which will apply to goods and services harmful to health or the environment, in order to discourage the production and consumption of such goods.
These two changes imply significant changes to a set of constitutional provisions. For example:
a) they will follow the value added taxation model, or they will adopt the debit and credit mechanism, which will eliminate the cumulation still existing in the STN;
b) will have broad coverage, affecting all goods and services, both tangible and intangible, including rights, simplifying taxation, avoiding the accumulation of tax residues along the production chains and removing important causes of disputes between taxpayers and the financial administration;
c) will have the same determining facts, calculation bases, non-incidence hypotheses, taxable subjects, immunities, specific, differentiated or favored regimes, and the same non-cumulative and crediting rules, another factor for simplifying the system;
d) they will not form part of the calculation base itself nor will they be applied to each other, or their rates will be applied “externally”, which will avoid administrative and judicial disputes and challenges on the basis of calculation of the tax;
e) will not allow tax benefits and incentives, except in the cases provided for by the Federal Constitution itself, which will be national in nature;
f) it will burden imports, but not exports, adapting to the internationally accepted standard.
Differentiated regimes are also envisaged, the objective of which is to reduce the tax burden on certain goods and services.
This is the case, for example, of the national basic food basket; educational and health services; from medical devices, medicines and basic healthcare products for the menstrual cycle; Public passenger transport services by road, rail and waterway; agricultural, aquaculture, fishery, forestry and fresh plant extraction products; agricultural and aquaculture inputs; artistic, cultural, journalistic, audiovisual productions and national sporting activities; and goods and services related to national security and sovereignty, information security and cybersecurity.
According to several experts, the approved and promulgated Tax Reform aims to simplify and reduce bureaucracy in the legal tax regime. Is this a reality or simply a wish?
For the illustrious president of the Chamber, Arthur Lira, “the intent of the reform is to be neutral, it will reduce bureaucracy and simplify. Everyone will know how much they pay in taxes, and we hope to take advantage of the transition to make Brazil the country which is today and not that of the future”.
As regards the authorization for the creation of the Selective Tax (SI), which will apply to goods and services harmful to health or the environment, in order to discourage the production and consumption of such goods, it will have the important role and relevant to promote sustainability and mitigate climate change by differentiating the consumption of products harmful to health and the environment.
The tax will have a non-fiscal nature (the tax will have a purely regulatory character). As a result, the tax will not be used for its primary collection function. Its tariffs will be determined by the National Congress to reduce the consumption of certain goods and the exercise of activities harmful to the environment (one of the guiding principles of the reform), aiming at the transparent adoption of environmental sustainability criteria and the reduction of emissions of carbon.
Although the tax is a federal responsibility, the States, the Federal District and the Municipalities will receive the majority of the revenue (60%). This distribution is the effective way to compensate and mitigate any damage that may occur in the places where the potentially harmful activity is carried out.
The selective tax must be regulated by law, promoting stabilization and, consequently, legal certainty. Its tariffs can be approved by ordinary law and must respect the principles of precedence (publication in the year preceding its validity) and nineteen years.
From the perspective of fiscal transparency, to facilitate the calculation of the tax and the fulfillment of the ancillary obligations, the tax must be calculated “from the outside”, so that it does not become part of the tax base.
Initially designed to replace the IPI, it will not apply to all industrialized products and will have to be charged for the production, extraction, marketing or import of goods and services harmful to health or the environment, according to the terms defined in the complementary law.
The new tax will not be applied to exports and may have the same taxable event and calculation basis as other taxes, integrating the ICMS and ISS calculation bases, while they are still in force, and IBS and CBS.
Some special rules are explicitly foreseen: i) they will not concern electricity and telecommunications; ii) tariffs can be as a percentage or per unit of measurement of the product (m³, for example); and ii) in extraction, the maximum rate will be equal to 1% of the market value of the product.
The new tax, called “sin tax”, will essentially act as a sort of “extra tax” to discourage the development of activities (goods and services) that could be harmful to health and the environment. This is the case, for example, of cigarettes and alcoholic beverages.
It is important to underline that the National Congress chose to give the Selective Tax a second use, to maintain the competitiveness of products manufactured in the Manaus Free Trade Zone, given its social function and preservation of the Amazon rainforest.
Another important element of the reform now approved is to promote a safe transition towards the new tax model with well-defined and planned stages for entry into force. Following the approval and promulgation of the Constitutional Amendment, complementary and ordinary laws will be necessary to align and detail specific tax rules, including, but not limited to, the form of collection and transitional rates of new taxes, the extinguishment of the currently existing taxes and the validity of the new tax model, which should only come into force from 2033.
Despite being positive as a rule, will we be able, in fact and in practice, to build a new legal-fiscal regime that aims for simplicity, transparency, fiscal justice, cooperation and environmental protection?
He is a lawyer and consultant for the CCA IBGC.
Source: Terra
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