Tax reform will be on the agenda of the first meeting of 2022, confirms CCJ president

By Agência Senado
Published on 01/07/2022 at 11:55 am

The tax reform proposal ( PEC 110/2019) will be the priority of the Constitution and Justice Committee (CCJ) of the Senate in resuming its work in 2022. This is what Senator Davi Alcolumbre (DEM-AP), chairman of the committee, promised. He stated in December that the proposal will be based on the first meeting of the CCJ after the parliamentary recess.

David hopes that the report by Senator Roberto Rocha (PSDB-MA) on the PEC to be read in the commission at the beginning of February. He also said that he intends to forward the proposal to the Senate Plenary in February, along with a request for urgency.

— I make a public commitment that, in the return of the commission’s work, we will read and vote on the matter. We have the commitment of the president of the Senate, Rodrigo Pacheco, that he will take the proposal to the Plenary from the vote in the CCJ – declared Davi in ​​a meeting of the commission on December 15th.

In October, Roberto Rocha delivered a first version of his report to Rodrigo Pacheco. On the occasion, the President of the Senate reiterated that “the National Congress is committed to tax reform”.

— We need to deliver to Brazilian society a new system model tax. Everyone understands that the Brazilian system is not good and needs to be modified because it is very complex, difficult to understand and scares away investors — highlighted Pacheco.

IVA

Roberto Rocha highlighted that his report determines the “unification of the consumption tax base”, with the creation of a value-added tax (VAT) dual: one for the Union and another for states and municipalities.

The VAT for the Union would be called Contribution on Goods and Services (CBS) and would have its origin in the unification of IPI, PIS and Cofins. CBS would have a single rate of 12%, applicable to various sectors — with the exception of financial services, which would be taxed at a rate of 5.8%.

VAT for states and municipalities would be called the Goods and Services Tax (IBS) and would have its origin in the unification of ICMS and ISS. In principle, states and municipalities would have the autonomy to set their rates.

Supporters of VAT point out that this type of taxation avoids the accumulated collection of taxes at different stages of the production, trade and provision of services, thus eliminating the so-called “cascade effect”.

According to Roberto Rocha, this system will allow for an increase in the base of taxpayers and the reduction of the tax burden over time. He also points out that countries like Canada and India use a similar system.

Other measures

The report determines that, at a later stage, a selective tax will be created (replacing the current IPI). The new tax would be levied on cigarettes and other tobacco products and also on alcoholic beverages.

The text also provides for: the expansion of the list of goods and services with special regime of taxation; linking the granting of tax credit to the effective payment of the tax; the definition of rules for tax administration by states and municipalities; exemptions for the IPVA; the creation of a new calculation basis for the IPTU; the possibility of returning employer contributions to Social Security in labor-intensive sectors.

In addition, the PEC can pave the way for laws — complementary and ordinary — complete and regulate the tax reform. This may remove from the Constitution the differentiated tax regimes, which are granted to specific sectors of the economy. Thus, a complementary law could institute, for example, special regimes to benefit specific segments.

Roberto Rocha also recalls that his report provides for the creation of the Development Fund (FDR), to be established by a complementary law, financed exclusively with resources from the Goods and Services Tax (IBS) – with percentages that would vary according to the actual increase in collection, not exceeding 5%.

Complex topic

Many senators recognize that tax reform is a complicated topic, on which it is difficult to reach consensus — among other reasons, because there are several taxes related to various levels of government and because the collection and distribution system is complex.

In addition to PEC 110/2019, there are other proposals on the subject that are being processed in the National Congress. One of them is the bill that deals with the Income Tax legislation (PL 2.337/2021), which is under analysis by the Senate’s Committee on Economic Affairs (CAE). The rapporteur of the matter is Senator Angelo Coronel (PSD-BA). About 30 amendments to this project have already been presented.

For PEC 110/2019, 168 amendments were presented. Roberto Rocha observes that “the reform [tributária] is an extremely complex matter, which demanded dialogue with all sectors of society, with all spheres of government and with all Powers”. He reiterates that the reform is necessary and urgent in the face of a “chaotic, inefficient and inequitable Brazilian tax system”.

Roberto Rocha argues that “it is necessary, therefore, we move to a simpler model, with few rates, few distortions, which reduces the cost of compliance and litigation”. He adds that other laws will be needed to complete the reform. “The road is long, but the most crucial step has already been taken”, he says in his report.