Income Tax Reform shrinks revenue by R$ 53.6 billion, study points out – Economy

BRASILIA – The changes introduced by Chamber in the reform of the Income tax cost R$ 53.6 billion. This is the loss of revenue between the original project sent by the government and the rapporteur’s opinion, Celso Sabino (PSDB-PA), approved on Wednesday night in a run over and in the throes of voting.

As the deputies voted without the final opinion with the changes having been filed, the vote is being called a “secret project”. Until last night, after the vote on the so-called highlights (suggestions for change), the final text of the project was not yet known.

The calculations were made by the economist Sergio Gobetti to National Committee of State Finance Secretaries (Comsefaz). The project prepared by the team of the minister of Economy, Paulo Guedes, contained a collection increase of approximately R$ 12 billion, while the text that came out of the Chamber has a net loss of R$ 41.1 billion for Unity, States and Municipalities.

The bill already considers the vote on the latest changes made yesterday, when deputies reduced the rate of taxation on profits and dividends from 20% to 15%, in a script that was already agreed upon by the president of the Chamber, Arthur Lira (Progressives-AL), before the vote on the main text.

The loss of revenue for the coffers of regional governments was estimated at R$19.3 billion – R$9.9 billion for governors and R$9.3 billion for mayors. The possible loss of revenue yesterday scared the financial market, which reacted negatively to the vote – bank shares fell and the Ibovespa, the main index of the São Paulo Stock Exchange, fell 2.3%. The 2022 Budget project, already tight due to precatório (debts that the Union needs to pay after final court rulings), was made taking into account the neutral impact of the reform, that is, without losses or revenue gains .

The confusion surrounding the project is such that the command of the project itself IRS informed Comsefaz that the fall of Social Contribution on Net Income (CSLL), included in the approved opinion, was 0.5 percentage point, and not 1 percentage point, as was disclosed to deputies at the time of voting. The information was later corrected by the tax authorities to confirm the reduction from 9% to 8%, but still dependent on the revocation of subsidies.

“In light of what was approved, the states will be in opposition and will fight for the Senate to change,” said the institutional director of Comsefaz, André Horta. To state, Sabino criticized the Comsefaz data and informed that other points were not considered. “It’s all crazy spreadsheet. An intern would do better”, she attacked. The report of state asked for the final text of the approved project, and the rapporteur informed that it would be published in the official diary today.

Lira’s steamroller in the vote received criticism from various sectors and could lead to legal challenges to the voting rite. “The text was voted on without being presented. We can say without exaggeration that a secret project was voted on”, said the tax officer Luiz Bichara. He asked his team to redo the step-by-step voting in chronological order to show the lack of transparency in the process. The chronology points out, for example, that at 7:40 pm on Wednesday, with the voting process already open, the leader of the PSOL, Talíria Petrone (RJ), asked Lira to file the substitute with a deadline for analysis – which was not done.

Who wins and who loses with the Income Tax reform:

work income

All taxpayers will benefit to some extent from the correction in the Personal Income Tax (IRPF) table. For example: whoever earns R$3,000 now pays R$95.20 in tax per year. With the reform, you will be able to spend R$ 37.50.

Those who earn up to R$ 52,818 per year will not be affected, as they will be able to deduct 20% of their income in a simplified way, up to the ceiling of R$ 10,563.60. For those with income above that, there may be some loss due to the lower ceiling of the simplified discount (previously it was R$ 16,754.34).

capital income

There was no change.

Companies with sales of up to R$4.8 million earn, as they are currently taxed at around 12%. As the reform reduces the IRPJ and CSLL rates, but maintains the exemption for distributed dividends, the effective rate is now around 8% for service providers. The difference in taxation of these companies for an employee in the CLT will widen even more.

The final effect of the reform will depend on the tax benefits received and on the use or not of the Interest on Equity (JCP) to remunerate shareholders and the size of the slice of dividends. In the case of a company without interest on equity and without other deductions, the rate currently at 34% on IRPJ and CSLL will drop to 26%. Thus, for every R$100, R$26 will be collected in taxes, and another R$74 will remain with the company. If the company distributes the dividends in full, the tax burden will end up increasing, as there will be a 15% tax rate on individuals on the R$74.