With the dollar at R$6.15, deputy Reginaldo Lopes said that the project will allow reindustrialization and Brazil’s competition in the international market
The rapporteur of the tax reform text in the Chamber, deputy (PT-MG), said that the project will allow the reindustrialization of Brazil and also position the country in the international scenario of “good practice in consumption taxation”. The Chamber of Deputies on Tuesday (Dec 17) approved the main text of the reform regulations.
“With the consolidation of the reform and implementation, Brazil will be able to compete in the domestic market with more value-added goods and compete in the international market beyond the primary sector”he told CNN Talks.
The goals of the reform, according to him, are: increasing GDP (Gross Domestic Product), producing wealth and distributing it to the population. Regarding the primary sector, he said that it will have more opportunities to add value, which would mean “obligation” of the country in producing wealth.
“The Brazilian economy only has a future if it overcomes this trap of low average per capita income. As long as the Brazilian people have a per capita income lower than China and lower than India, there is no miraculous economic policy capable of making Brazil a fair country”he stated.
According to him, the text corrects “historical distortions”like “charge at origin and not at destination”, no “accumulated and non-added value”charging for exports, investments and also charging the people in “tax tax”.
Even with votes in Congress, the dollar opens higher and exceeds R$6.15. Quoted at R$6.15, the dollar rose 0.93% at 10:28 am. Investors react to the votes on Tuesday (Dec 17, 2024) in Congress and await the Fed’s (Federal Reserve, the US central bank) monetary policy meeting and the fiscal package.
APPROVAL OF THE REFORM
The approval of the main text of the tax reform regulation (PLP 68 of 2024) regarding the unification of taxes for the creation of the IBS (Goods and Services Tax) and the CBS (Contribution on Goods and Services), which will make up the IVA (Value Added Tax) dual. The text goes to presidential sanction, which may veto sections. The transition rules will come into effect from 2026.
The rapporteur, Reginaldo Lopesretreated in some by the Senate to the original text voted by the Chamber, in July 2024. The benefits of a 60% reduction in IBS and CBS rates on mineral water, biscuits, veterinary services and basic sanitation were withdrawn – the latter will have partial refund of taxes to low-income families registered with CadÚnico, the cashback.
Regarding medicines, the congressman returned to the original understanding of the Lower House and overturned the proposal of the rapporteur of the matter in the Senate, Eduardo Braga. Instead of Congress approving a complementary law with the list of medicines that will be exempt from IBS and CBS, the list of products that had already been previously defined by the Chamber returns.
The deputy also reestablished the incidence of IS (Selective Tax) – known as “sin tax” – about sugary drinks (like soft drinks), which had been removed by the Upper House. IS is an additional tax that is levied on items supposedly harmful to health and the environment.
“We will not have a standard rate higher than 26.5%”, stated the PT deputy on the stand while reading the report. According to him, the opinion reduces the standard rate by 0.71 pp (percentage points) that would be increased if the changes made by the Senate were preserved. “That was the effort of this report” he stated.
Based on calculations by the Ministry of Finance, the final text raised the rate to around 28%. If this value remains above the established limit until the final transition of the tax system, in 2033, the government will need to send a complementary bill to adjust the differentiated regimes and benefited sectors, aiming to reduce the rate to 26.5%.
Here are the main changes made by the Chamber in relation to what had been approved by the Senate:
- basic sanitation: the 60% reduction in IBS and CBS was removed; it was included, however, in cashback, a mechanism that will allow partial refunds of service payments to low-income families;
- mineral water: the 60% reduction in IBS and CBS rates was removed;
- cookies: the 60% reduction in IBS and CBS rates was removed;
- medicines: returns to the list of medicines approved by the original text of the Chamber that will be exempt from IBS and CBS; It will no longer be up to Congress to approve a complementary law with the list of medicines that will be exempt;;
- veterinary medical services: will have a 30% reduction in the rate, not 60%.
“SIN TAX”
The Chamber defined that the “sin tax” will apply to:
- sugary drinks
- vehicles;
- vessels and aircraft;
- smoking products;
- alcoholic beverages;
- mineral goods, including mineral coal; and
- prediction contests and fantasy sport.
REMEMBER
Congress approved the PEC (Proposed Amendment to the Constitution) in 2023 which created the reform. What was approved this Monday (Dec 16) was the regulation of the reform, that is, the specific rules.
The main objective of tax reform is to simplify taxes in Brazil. It establishes the unification of federal, state and municipal taxes.
Today, Brazil has 5 taxes that apply to products purchased by the population:
- IPI (Tax on Industrialized Products);
- PIS (Social Integration Program);
- Cofins (Contribution for Social Security Financing);
- ICMS (Tax on Circulation of Goods and Services); and
- ISS (Service Tax).
The tax reform aims to simplify them into dual VAT for goods and services, with federal taxation, which would unify IPI, PIS and Cofins, and another state/municipal taxation, which would unify ICMS and ISS.
In addition to PLP 68 of 2024, the Senate is processing the which establishes the rules of the IBS (Goods and Services Tax) Management Committee, which will be responsible for collecting the tax and distributing the proceeds to States and municipalities. The project and awaits a vote from the senators.
