The State Court of Audit (ECA) has pointed to failures to grant tax benefits by management (Republicans) and said the government cannot measure the real impact of tax exemption policy on society.
The failures are in the report of the annual accounts of the São Paulo government of 2024, approved on Wednesday (25) with caveats and recommendations in 11 areas.
The Court states that Tarcisio management is inaccurate in projecting the total benefits granted in the State, exemplary that, between the preparation of the LDO (Budgetary Guidelines Law) and LOA (Annual Budget Law), the total amount of exemptions varied 7.09%.
“Such oscillations denote the need to improve the method to ensure more consistent predictions,” the agency said.
In addition, the ECA identified that spending on tax benefits in São Paulo grows up higher than the total state’s collection.
“The inspection [do TCE] He pointed out that the annual growth of revenue waiver exceeds the growth of tax revenue. As an example, the average annual growth rate of renunciations for the period 2025 to 2027 is approximately 6.09%, while the revenue is projected at 5.54%, “says the report approved Wednesday, prepared by Counselor Dimas Ramalho.
The counselor stated that the TCE inspection pointed out that the R $ 61 billion in tax benefits granted in 2024 benefited about 433,000 taxpayers. The projections of the São Paulo government were that, last year, the state had spent $ 75.6 billion on the benefits.
In presenting his vote, Ramalho pointed out that tax privileges are granted “without coherence analysis with budget planning, goals and previously established strategies”. In addition, “there is no objective process of monitoring and assessing benefits, whether prior or later”.
The counselor also stated that “the concession is materialized without proof of compliance with the counterparts established by the Fiscal Responsibility Law” and that the benefits are granted “to business entities in debt with state coffers”.
All these problems, according to the rapporteur, had already been identified in previous years.
“In short, all these failures lead to the conclusion that the system of granting revenue waiver by the State of São Paulo does not allow measuring the social and economic benefit of the implemented measure and, consequently, it is not possible to certify the real advantage of this fiscal policy,” he said.
The ECA determined that the government will no longer be able to grant tax benefits through decree, so that the issue will be discussed more transparently.
Tax benefits are exemptions, reductions of rates or ICMs credits that favor specific sectors of the economy.
Last year, the government launched a program called “São Paulo in the right direction”, which had as one of the pillars the revision of all tax benefits in the state. Tarcisio usually deals with the program as an example of the austerity of his management at events with investors.
In a balance sheet released at the end of the year, the government stated that it analyzed 263 benefits, determining the end of 84. This review would be responsible for a 15% reduction in the total tax waiver of São Paulo, the equivalent of R $ 10.5 billion.
In LDO this year, however, the government presented a projection of fiscal waiver of just over $ 78 billion to 2025. In the previous year LDO, the projection was that, for 2025, the resignations added just under $ 71 billion.
When a Sheet It dealt with the subject, the government argued that new internal projections, which were not in LDO, indicated that the total benefits would be equivalent to 30% of the collection of São Paulo ICMS but that if the review program had not been implemented, the expense would be 34% – which would indicate the effectiveness of the measure.
Through a note from the State Department of Finance, Tarcisio management stated that “the tax benefits mentioned by the ECA were granted over decades and pioneering in full and individualized manner by the current management.”
“The Court of Auditors of the State of São Paulo (TCESP) recognized the advances in governance and management of tax benefits, highlighting the review process started in 2024, whose impacts will be reflected in the 2025 accounts, to be analyzed in 2026,” follows the note.
“Among the highlights are the improvement in information sharing, the improvement in the governance of the concession of incentives.”
“Regarding the values actually spent, it is necessary to clarify that different budget pieces (such as LDO and LOA) and calculation bases are not comparable to each other. Estimates and executions refer to different periods, which can generate misinterpretations,” the government says.
“The calculation of the effective value of benefits occurs with lag: two years for exemptions and reductions of calculation basis, and one year for credits granted. These values may vary according to external factors, such as the performance of economic activity, inflation, entry or exit of contributors and changes resulting from agreements, especially in the area of health,” concludes the note.
