The Senate discusses the merger of state and municipal taxes (ICMS and ISS)

As the House discusses CBS and the new income tax, the Senate (pictured) is due to deal with a proposal to unify ICMS with the ISS. Photo: Geraldo Magela / Senate Agency

While the first two tax reform bills are in the Chamber of Deputies, the Senate should begin the discussion of a third text which deals with the evolution of the country’s taxation. The idea is that while the House discusses the proposal to merge PIS and Cofins into the Contribution on Goods and Services (CBS), in addition to the income tax changes, the Senate is considering a proposal for unification of the ICMS, a tax under the jurisdiction of the State, with the ISS, for attribution of the municipalities.

The proposal will be presented by Senator Roberto Rocha (PSDB-MA), in a report on the Constitutional Amendment Proposal (PEC) 110/2019. If approved, the country would have a “dual” consumption tax model, with the CBS and the Goods and Services Tax (IBS) replacing the current PIS, Cofins, ICMS and ISS.

PEC 110 originally provided that the IBS would result from the unification of nine taxes – PIS, Cofins, IPI, Pasep, IOF, Cide-Combustíveis, Salary-Education, ICMS and ISS – and also incorporated the Contribution on the net income (CSLL) to the Corporate Income Tax (IRPJ).

The text was even analyzed, along with that of PEC 45/2019, within the Temporary Joint Commission for Tax Reform, and was the subject of a report produced by MP Aguinaldo Ribeiro (PP-AL) with a substitute for the two proposals. However, the document, presented in May, ended up being ignored by House Speaker Arthur Lira (PP-AL), who, by agreement with the government, had the CBS Bill dealt with in the House, more restricted. , because he understood that the reform would pass more easily if it was done in a “clear-cut” way.

In the document produced by the collegiate church, it was proposed, in addition to the unification of taxes at all federal levels, the transformation of the tax on industrialized products (IPI) into a selective tax, which would have federal competence and a purpose. extra-fiscal, with the objective of being applied to discourage the consumption of certain services, rights or products, such as cigarettes and alcoholic beverages, for example.

The President of the Senate, Rodrigo Pacheco (DEM-MG), who, unlike Lira, defended the treatment of the comprehensive reform, now wants to accelerate the progress of the new report on the PEC 110. Rapporteur of the proposal, Rocha was the chairman of the joint committee and should include in his opinion parts of the report produced by the collegiate church.

Since early July, the senator has met with the government’s economic team to refine the details of the text. About two weeks ago, he was received in the office of Minister of Economy Paulo Guedes, for a meeting which was also attended by MP Luiz Carlos Motta (PL-SP), rapporteur of the CBS project in the House.

The government is against the unification of federal taxes with state and municipal taxes

The tax design under construction is similar to a proposal developed by the Institute for Applied Economic Research (Ipea) in 2018, under the government of Michel Temer (MDB). In common, the basis of the model was a double value added tax (VAT), with a federal modality, resulting from the unification of PIS / Pasep, Cofins and Cide, and a state modality, the collection of which would have a part transferred to municipalities.

Guedes has previously spoken out against the idea of ​​a tax that unifies federal, state and municipal taxes, but has mentioned in recent statements that the changes in the ICMS and ISS are a natural step in the process. reform after CBS approval.

At an event organized by the National Confederation of Industry (CNI) last week, the minister said reform must be done gradually so that citizens can reflect on the changes. “The unification of taxes would not be accepted by the five thousand mayors,” he declared.

To CNI chairman Robson Braga de Andrade, who has championed comprehensive reform, including federal, state and municipal taxes, Guedes argued that the debate was banned due to the requirement for a fund to compensate for losses in states and municipalities that would have cost the federal government 400 billion reais.

In the newspaper “O Estado de S.Paulo”, Rocha said this week that he was working on his report aimed at a broad reform “which respects the federative pact and the relations already consolidated in the private sector”.

According to the publication, in the proposal currently being negotiated with the government, the resources for regional development policies in the states would come from part of the IBS itself, without any contribution from the Union. for the implementation of the IBS would be four years, starting with a trial year.

The tax reform will have four stages

The creation of the IBS from the ICMS and the ISS will be the third stage of tax reform. Besides the bill creating the CBS, the Chamber of Deputies is changing the rules of income tax, which has already had a preliminary report presented by MP Celso Sabino (PSDB-PA).

The fourth and final phase of the reform will be the creation of a debt renegotiation program for sectors affected by the economic crisis. The proposal is to be dealt with in the Senate, with a report from Senator Fernando Bezerra (MDB-PE), Government House Leader.

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