Farm renews optimism with revenue after revenue closes at 17.5% of GDP in 2023 By Estadão Conteúdo

2024-01-31 19:12:29

Treasury renews optimism with revenue after revenue closes at 17.5% of GDP in 2023

The economic team reinforced this Wednesday, 31, that the performance of federal revenue in 2023 was profoundly affected by decisions made by the previous government and renewed optimism that, this year, the level will rise and reach around 19% of GDP , after approval of the agenda of measures proposed by the Ministry of Finance. The fear that the 2024 budget law was approved with an overestimated revenue level is pointed out in the market as one of the reasons for disbelief in the zero deficit target.

A study released this Wednesday by the Economic Policy Secretariat (SPE) of the Ministry of Finance shows the size of the challenge. In 2023, the central government’s share of net revenue reached just 17.5% of GDP, compared to 18.4% recorded in 2022. The calculation was made by the SPE based on data from the Treasury and the Federal Revenue.

According to the secretariat headed by Guilherme Mello, were it not for three events that affected the dynamics of revenue growth, including the loss of revenue resulting from the ICMS subsidy funded by the States, net revenue would gain 0.9 pp of GDP in 2023, going from 17.5% to 18.4%, the same level as in 2022.

“Collection performance was profoundly affected by decisions taken in previous periods that caused the erosion of the federal government’s revenue base. The agenda for correcting these distortions and promoting tax justice made significant progress in 2023 and should cause positive structural impacts on revenue in the coming years, returning to the level of federal net tax burden closer to 19% of GDP, just as it was at the beginning of the 2010s”, stated the SPE in the note “Macrofiscal Balance of 2023 and perspectives for 2024”.

In the study, the secretariat recognizes that the collection result in 2023 was “below” what was desired, and lists a series of factors that, in the Treasury’s assessment, created this scenario. For example, the “high” volume of compensation and tax credits arising from court decisions – which will now have a limitation, a rule included in the Provisional Measure for payroll reburdenment. The SPE pointed out that the government failed to collect around R$54 billion due to compensation for the so-called “Thesis of the Century”, which excluded PIS/Cofins from the ICMS calculation base.

In the case of state funding subsidies, the calculation is that the old rule impacted the Union’s coffers by R$23.5 billion last year. The SPE also highlights the estimate that, in 2023, the federal government’s revenue was negatively impacted by R$32.7 billion due to the reduction in PIS/Cofins rates on fuels and by R$11.4 billion due to the reduction in IPI rates.

Also included in the account is the deflation of the IGP-DI, which was reflected in the frustration of more than R$20 billion in 2023 revenue. Finally, the SPE cites the “delay and mitigation” of the effects of legislative measures to increase revenue , which, although they were sent to Congress last year, were only approved at the end of 2023, “causing their effects on revenue to be largely postponed until 2024”.

The SPE also calculated that, in the scenario in which net revenue reached 18.4% of GDP last year – and not 17.5% – the 2023 primary deficit would exceed 1.27% (in the calculation that excludes the payment of court orders) to 0.15% of GDP. “The primary result would, therefore, be better than that initially projected by the Ministry of Finance, if it were not for the distortions and sources of erosion of the Union’s revenue base listed which, despite being addressed by the Ministry’s economic team, were only resolved by the end of this year following the approval of the respective bills sent to the National Congress and the complete re-encumbrance of fuels”, he stated.

In a recent ruling by the Federal Court of Auditors (TCU), as shown by Broadcast (Grupo Estado’s real-time news system), the Court’s technical area classified as “apparently optimistic” the government’s expectation that the Federal Primary Revenue Net this year will be 19.2% of GDP, a level “much above” what has been observed in recent years.

The lack of credibility regarding the number is one of the reasons that led the Court of Auditors to conclude that there is a possibility of the Executive ending the year with a deficit of R$ 55.3 billion (-0.5% of GDP), against the zero deficit target set by the economic team.

On the expenditure side, the SPE also pointed out this Wednesday that, as a whole, expenditure on social expenditure had a real growth of 15.6% in 2023 compared to growth of 2.8% in 2022. The average growth of these expenditures between 2017 and 2022 was 3.6%, revealing that, in 2023, there was an expansion “considerably higher” than the average for this period.