2023-11-09 02:01:13
© Reuters. Senate Plenary 03/03/2021 REUTERS/Adriano Machado
(Text updated with conclusion of voting in the 1st round)
By Maria Carolina Marcello
BRASILIA (Reuters) – The Senate plenary concluded this Wednesday the vote in the first round on the Proposed Amendment to the Constitution (PEC) of the tax reform which, among other points, provides for the unification of taxes and a “brake” on growth of the cargo, and the second round discussion of the matter has already begun.
In the first round, senators approved the basic text of the PEC by 53 votes to 24.
“Today we write a new page in our history! We approved in the first round, with 53 votes in favor, my replacement for the Tax Reform PEC. A victory for all Brazilians”, celebrated the proposal’s rapporteur, senator Eduardo Braga (MDB- AM).
“We took another important step to deliver to the country a new consumption tax system, simplifying and with a lock to prevent tax increases for taxpayers.”
As it is a constitutional change, the proposal needed at least 49 votes in favor. Government estimates showed a tight score, with around 50 senators in favor.
Once approved in the second round, the proposal will go to the Chamber, where it had already been approved, in July. The text returns to the House precisely because it was changed by the senators.
There are, in Congress, those who defend a sliced enactment of the PEC, leaving the points of disagreement for a parallel proposal.
Senate source assesses that Braga’s report is the “password” for slicing: it passes through the Senate by a close vote and returns to the Chamber, where exceptions included by the senators as incentives to the Northeast must be removed, and this text is then sent for promulgation.
Shortly after voting on the basic text in the first round, the Minister of Finance, Fernando Haddad, said that he sees no need to split the proposal to avoid delays in processing and that he believes in its promulgation in 2023.
Once voting on the PEC is over, Congress will have the task of analyzing complementary bills that regulate constitutional changes.
The government also has plans to send, at the beginning of 2024, an Income Tax reform.
CONCESSIONS AND COUNTERPOINTS
In an attempt to obtain support from peers, the proposal’s rapporteur incorporated into his opinion — approved by the House’s Constitution and Justice Committee (CCJ) the day before — a series of exceptions and special treatments. He considered, however, that “for each concession that was made in the report of the 25th (when he presented the opinion), there was a reduction in the concession granted by the Chamber of Deputies”.
The Treasury had already stated that a large number of exceptions would put pressure on the unified rate to be adopted. The extraordinary secretary for tax reform at the Ministry of Finance, Bernard Appy, maintains that the ideal would be to approve a reform without any exceptions, but recognized the need for political debate and openness to concessions. He also stated, on several occasions, that the rate to be adopted will be the one that maintains the current tax burden.
Even so, the rapporteur accepted the parliamentarians’ suggestion and introduced, in the text of the PEC, a “lock”, a limit to the growth of the tax burden in the country. Taxation will be linked to the variation in Gross Domestic Product (GDP) and there will be no increase in the burden if there is no growth in the indicator.
During the discussion of the proposal in the Senate, Braga rejected suggestions from members of the opposition with alternative mechanisms to limit the rate to be adopted for the tax that will unify five currently existing taxes.
“Setting a ceiling based on predetermined rates is a reckless, random and lack of technicality measure, which will put the finances of all federated entities at risk”, argued the senator, from the stand.
“If the fear, certainly legitimate, is that the approval of the PEC will lead to an increase in the tax burden, we are convinced that the model included in the substitute we presented guarantees that this will not happen”, he added.
The rapporteur said that he will ask the Treasury for a study on the rate to be adopted taking into account the text to be approved by the Senate, just as he requested a survey when he received the reform voted by the Chamber of Deputies.
Last Monday, Appy estimated an increase of 0.5 percentage points in the standard rate of Value Added Tax (VAT) that is being proposed in the reform based on changes to the text under discussion in the Senate, with the assessment that the final value, based on regulation, is between 25.9% and 27.5%.
The concessions did not prevent, however, governors from the Consortium for the Integration of the Southern and Southeastern States from speaking out against the proposal shortly before the vote, under the assessment that the text undoes advances approved by deputies, removes the autonomy of the States and creates imbalance between Federation entities.
They even defended the postponement of the vote so that counterpoints to the report could be discussed, under the warning that they would instruct the benches in their states to vote against Braga’s opinion.
(Additional reporting by Lisandra Paraguassu and ricardo Brito)
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