Tax reform is an important agenda for the economic and social development of the country since the current system is complex, bureaucratic, and unequal. Brazil’s tax burden is one of the highest in the world, negatively impacting the competitiveness of businesses and the purchasing power of citizens.
Currently, two tax reform proposals are under consideration in the National Congress: PEC 45/2019 and PEC 110/2019. Both proposals aim to simplify the Brazilian tax system, reduce the tax burden on businesses, and stimulate economic growth. However, there are significant differences between the two proposals, such as the method of redistributing collected resources and whether or not to include property taxes.
PEC 45/2019 – “New Tax Reform”
PEC 45/2019 was presented by Congressman Baleia Rossi (MDB-SP) and economist Bernard Appy. This proposal suggests creating the Tax on Goods and Services (IBS), which would unify five taxes on goods and services: IPI, ICMS, ISS, PIS, and COFINS. The IBS would be levied at all stages of the production chain to avoid tax cumulativeness.
Additionally, PEC 45/2019 proposes the elimination of interstate ICMS and the creation of a compensation fund for states that lose revenue due to the change. The fund would consist of resources from the Union, states, and municipalities.
The proposal also establishes that IBS revenue be shared among the Union, states, and municipalities, with each federative entity having its own rate. The idea is to decentralize tax collection, giving states and municipalities more autonomy to set their rates.
PEC 110/2019 – “Comprehensive Tax Reform”
PEC 110/2019 was presented by former Senator Roberto Rocha (PSDB-MA) and aims to unify nine taxes on goods and services into a single national value-added tax (VAT). The taxes to be unified are: IPI, IOF, PIS, COFINS, CIDE, Education Tax, ICMS, ISS, and COFINS.
Like PEC 45/2019, the proposal envisions the creation of the Tax on Goods and Services (IBS), which would be shared among the Union, states, and municipalities. However, PEC 110/2019 proposes centralized collection of IBS revenue, with the Union responsible for tax collection and distribution of collected resources among federative entities.
Furthermore, the proposal suggests the unification of the Motor Vehicle Tax (IPVA) and Rural Territorial Tax (ITR) into a single property tax called the Tax on Property of Goods and Services (IPBS).
PEC 110/2019 also includes a selective tax that would apply to goods and services considered harmful to health and the environment, such as cigarettes, alcoholic beverages, and high-sugar products. This tax would have differentiated rates and would be exclusively earmarked for healthcare.
It is important to note that both proposals are in the discussion phase and may undergo changes during the legislative process.
In summary, the intention is to reduce taxes on production and consumption to encourage investment and job creation. Additionally, the reform aims to increase transparency in the tax system, eliminating loopholes for tax evasion and fraud. All these measures can boost the economy and generate long-term benefits for society while fostering the sustainable development of the country through the simplification of the Brazilian tax system and the reduction of bureaucracy.