States and municipalities want R $ 18 billion more in transfers to support income tax reform

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Chamber of Deputies postponed vote on income tax reform for the second time | Photo: Cleia Viana / Chamber of Deputies

After criticizing the different versions of the income tax reform project, the governors and mayors negotiated with the rapporteur Celso Sabino (PSDB-PA) and with the President of the House, Arthur Lira (PP-AL), to support the text in exchange for a counterpart that can cost around R $ 18 billion to collect from the Union.

According to the newspaper O Estado de S. Paulo, the deal would come with the approval of a package of proposals including a 1.37% increase in transfers from the federal budget to the Municipal Participation Fund (FPM) and percentages of three points in the state. Participation Fund (FPE).

The changes, which depend on the vote on two Constitutional Amendment Proposals (PECs), would guarantee an additional 6.5 billion reais per year to town halls and 11.3 billion reais to state governments. The PEC 231/2019, which increases the FPM by 1%, has already passed the Senate in two rounds and is only waiting for a vote in the hemicycle after having passed the first round. The measure would be added to a new proposal that would add 0.37% more to transfers.

The States, on the other hand, want to guarantee the approval of PEC 51/2019, which provides for a 4.5 percentage point increase in the FPE. The strategy is to have the Senate hold the vote on IR reform until the House approves the PEC with at least three additional percentage points for the EPF, according to Estadão.

Economist Felipe Salto, executive director of the Independent Fiscal Institution (IFI), a body linked to the Senate and which analyzes the fiscal scenario, criticizes the arrangement. “The IR reform is taking over there, it’s wide open. Now it is a question of raising the FPM as a price to push through the worst tax reform in history. The loss of income will be huge, ”he wrote on a social network.

After being postponed last week, the income tax reform bill would be voted on on Tuesday (17), but was once again taken off the agenda at PSOL’s request for membership of the government base. The proposal is expected to return to plenary next week with a new report from Sabino.

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