2023-06-23 03:10:36
© Reuters.
By Fabricio de Castro and Maria Carolina Marcello
(Reuters) – In a presentation on Thursday night of what should be the first of many versions of the opinion, the rapporteur for the tax reform in the Chamber, deputy Aguinaldo Ribeiro (PP-PB), said that his text puts as a general rule a single rate for the new Value Added Tax (VAT), and that there will be a rate reduced by 50% of the standard rate to cover specific products and services.
According to the deputy, the goods and services with a reduced rate will be urban, semi-urban or metropolitan public transport services; medicines; medical devices and health services; education services; agricultural, fishing, forestry and plant extractive products in natura; agricultural inputs, food intended for human consumption and personal hygiene products; national artistic and cultural activities.
In addition, according to Aguinaldo’s presentation, there will be exemption from taxation for some medicines, such as those aimed at treating cancer.
“Other drugs will have this treatment”, quoted the deputy, without specifying which ones.
Aguinaldo also stated that there will be a 100% reduction in the Contribution on Goods and Services (CBS), a new tax that unifies PIS and Cofins, in the case of higher education education services. According to him, the measure will allow the maintenance of Prouni.
The rapporteur’s text also provides for hypotheses in which individuals who carry out agricultural, fishing, forestry and in natura vegetable extractive activities are not subject to the CBS and the Tax on Goods and Services (IBS).
According to the deputy, individuals whose annual revenue limit is 2 million reais will be included in this case.
“We are contemplating with this measure more than 98% of rural producers in our country”, commented Aguinaldo.
The text of the tax reform also provides for the possibility of returning IBS and CBS to individuals “in a broad way”, in the words of the deputy. This will still be defined in a complementary law. The definition of the rate value is also left for later regulation.
The substitute presented by the rapporteur also foresees the maintenance in Brazil of two favored tax regimes: the Free Zone of Manaus and the Simples Nacional.
According to the deputy, his text also establishes the existence of specific tax regimes for some segments of the economy.
This is the case of the fuel and lubricants sector, which will have the characteristics of monophasia (collection made in the initial phase of the production chain), uniform rates and the possibility of granting credit to the tax payer.
In the case of financial services, transactions with real estate and health care plans, the deputy mentioned changes in rates, credit rules and calculation base, in addition to taxation based on revenue or billing.
According to Aguinaldo, some of these sectors will be subject to complementary laws.
Another rule provides that IBS and CBS will not be charged in the case of government purchases.
The text of the tax reform also creates a selective tax, which will be levied on the production, sale or importation of goods and services that are harmful to health or the environment. The excise tax is popularly known as the “cigarette tax”.
CREATION OF FUNDS
The substitute for the tax reform also provides for the creation of two funds to be supplied by the Union.
The first of these will be the National Fund for Regional Development, which aims to reduce inequalities between different regions.
Under the proposal, the Union will make contributions from 2029, with 8 billion reais, and the value will reach 40 billion in 2033. From then on, the value is perpetuated. Resources will be corrected by the IPCA-E.
The distribution rule, however, will still be discussed to later be incorporated by the Proposed Amendment to the Constitution (PEC) of the tax reform, explained the deputy.
“We will continue discussing the criteria for distribution of the Regional Development Fund”, said Aguinaldo, mentioning that there is still no consensus among the States in this regard.
The second fund will be focused on the transition in the collection of Tax on Circulation of Goods and Services (ICMS). According to Aguinaldo, its substitute guaranteed the already validated ICMS tax benefits until 2032.
The start of the transition was established as of 2029. To offset any losses from 2029 to 2032, the Union will make contributions to a Tax Benefit Compensation Fund or
Financial-Fiscal, to be distributed.
The text provides that the contribution of resources to the fund will be made by the Union in amounts that start at 8 billion reais in 2025, increase to 32 billion reais in 2028 and progressively fall to 8 billion reais in 2032.
“That’s the end of it,” commented Aguinaldo.
TAX TRANSITION
The transition from old to new taxes will take place over a period of 8 years.
In 2026, a rate of 1% will be applied, offset against PIS/Cofins; in 2027, there will be the entry of CBS, the extinction of PIS/Cofins and the reduction of the Tax on Industrialized Products (IPI) rates, with the exception of the French Zone of Manaus; from 2029 to 2032, the proportional entry of IBS occurs and the proportional extinction of ICMS and Tax on Services (ISS); and in 2033 the full effectiveness of the new tax system begins, with the extinction of the old one.
In addition, the substitute establishes that the transition to the principle of destination in taxation will take place in 50 years, between 2029 and 2078.
TAXATION OF INCOME AND EQUITY
The text of the tax reform also establishes the incidence of Tax on Motor Vehicle Ownership (IPVA) in the case of water and air vehicles.
The collection of tax on yachts and jets had been defended by sectors of society and in the National Congress itself by parliamentarians who saw as inconsistent the fact that only owners of land vehicles were subject to taxation.
The proposal also foresees the possibility of progressive IPVA depending on the environmental impact of each vehicle.
The substitute also establishes that the Tax on Transfer Cause Mortis and Donation of Any Goods or Rights (ITCMD) will be progressive due to the value of the transfer. In addition, it will be possible to collect tax on inheritances abroad.
The proposed text also requires that, within a period of up to 180 days after the enactment of the PEC, a proposal for reforming income taxation be sent to the National Congress. There is also a forecast that the increase in revenue obtained with the income tax reform will be applied in the reduction of taxation on the payroll and on the consumption of goods and services.
In practice, this would be a second phase of tax reform.
(Reporting by Fabrício de Castro in São Paulo and Maria Carolina Marcello in Brasília; Editing by Editing)
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