The Chamber of Deputies approved this Wednesday night (1) the basic text of the bill that changes the rules of the Income tax after an agreement between the president of the Chamber, Arthur Lira (PP-AL), with the opposition.
The text has a shallow cut of rates charged from companies, provides for the maintenance of taxation on dividends (profit distributed by companies to shareholders) and the removal of the income limit for individuals to request a simplified 20% discount.
The basic text was approved by 398 to 77. Now, the deputies will analyze suggestions to change the text. After that, the proposal goes to the Senate.
The rapporteur of the text, Celso Sabino (PSDB-PA), proposed to reduce the main rate of the IRPJ (Corporate Income Tax) of 15% to 8%, and stipulated a cut in the CSLL (Social Contribution on Net Income) rate of up to 1 percentage point.
In the previous version, the reduction of rates on companies was deeper (the IRPJ would drop from 15% to 6.5% and the CSLL would be cut by 1.5 percentage points).
Negotiations with the opposition to vote on the text were built throughout this Wednesday. Lira arrived at the Chamber in mid-afternoon still without a deal done. “We’ve been working on it since last week and today we’re still going to finish some talks to see if there’s a possibility to vote today,” he said.
The main trump card used by the president of the Chamber to attract the opposition was the proposal of dividend taxation, which became exempt in 1995 (during the government of Fernando Henrique Cardoso).
Even the PT, which initially defended the adoption of a progressive rate so that smaller companies were not taxed with the same weight as the large ones, gave in and decided to accept the idea of a fixed percentage of 20%.
The largest opposition party, the PT snatched from Lira the commitment that this change would not be removed from the text in the high-profile votes. From the beginning, the change was one of the most contested by businessmen who saw a greater tax burden.
To justify the change of position, Deputy Afonso Florence (PT-BA) stated that the project resumed taxation on profits and dividends and ended the interest on equity. “Two innovations in Brazilian legislation that granted exemption to large capitalists, distribution of large amounts of profits and dividends from the FHC government,” he stated.
Therefore, he said, the opposition removed the obstruction. “Because we achieved a revision of the IR table, taxation on interest on equity and profits and dividends, and we also managed to expand access to the simplified IR declaration”, he added. “This project is a solution that combines opposition positions, articulated by the rapporteur. It is a house project, not a government project,” he said.
In addition to the taxation of dividends, Lira accepted the proposal to release the 20% simplified declaration for all rents. The previous version of the text created a ceiling for anyone who wanted to request this discount, following the government’s original proposal – if the idea went ahead, only those who had an income of just over R$ 3,000 per month could ask for the discount (the equivalent of R$ $40,000 per year).
The agreement reached with the opposition also provides that individuals can only obtain a simplified discount equivalent to up to R$ 10,563.60, instead of the R$ 16,754.34 allowed today.
To expedite the vote, Sabino included in his new opinion the changes agreed to approve the text in plenary. Novo leader in the Chamber, deputy Paulo Ganime (RJ) criticized the unexpected vote of the text.
“We thought that this income tax bill had been buried, but unfortunately it came back on the agenda all of a sudden and with sudden support from almost all parties,” he said.
“It’s very strange, as the project was being disputed and now has the support of almost everyone. The Novo bench is against it. The measure brings more burden to the productive sector, increases the tax burden and discourages investment. We live on. an economic crisis and needs to deal with the economy and generate employment, and not increase the tax burden to discourage those who want to undertake and invest in the country.”
Exemption for micro and small businesses
The rapporteur maintained the dividend rate stating that it is adequate and maintained the exemption for micro and small companies opting for Simples and presumed profit (simplified regimes).
It also maintained the forecast for abatement companies of expenses with resources paid to the worker in the form of food stamp.
The rapporteur maintained the current tax treatment given to operations with aircraft and their parts and pieces, in addition to tax incentives related to Import Tax and IPI on vessels.
“The gain that would be obtained from these revocations would be negligible for the proposal, while it could bring negative consequences to regions highly dependent on waterway transport”, he justified.
The proposal kept the original government version to correct the individual income tax table, which had not been corrected since 2015, and increases from R$1,903.98 to R$2,500.00 per month the tax-free salary.
Sabino defended the correction in the exemption range of the Income Tax table and said it was “the largest since the implementation of the real plan, so that individual taxpayers will see a significant reduction in their income tax due, getting 16 million Brazilians – half of the total number of declarants – exempt from the tax.”