The Constitutional Amendment Bill (PEC) 110/2019, which covers the reform of consumer taxation in the country, has been parked in the Senate in the last months of 2021, but is expected to be a priority in the recovery legislative. works, from February 2021. 2022. The tax reform has the support of the President of the House, Rodrigo Pacheco (PSD-MG).
“Regardless of who is for or against, we must deliberate on the importance and meaning of the material. It will be on the agenda of the first meeting [da CCJ] reading of the report ”, declared the president of the Constitution and Justice Commission (CCJ) of the Senate, Davi Alcolumbre at the end of December, according to Valor.
The opinion presented by the rapporteur of the file, Senator Roberto Rocha (PSDB-MA), provides a substitute which proposes the unification of taxes and the creation of a selective tax.
The text also provides for the end of exemptions for items in the basic basket, with a tax refund mechanism for low-income families in return, in addition to the collection of the IPVA on ships and planes and the establishment of a regional development fund.
The substitute provides a constitutional basis for the bill drafted by the Executive, currently pending in the Chamber of Deputies, which creates the Contribution on Goods and Services (CBS) to replace the current PIS and Cofins. The report has the support of the National Committee of State and Federal District Secretaries of Finances (Comsefaz) and the National Confederation of Municipalities (CNM), in addition to the approval of the Minister of Economy, Paulo Guedes.
Check out the main changes proposed in Rocha’s replacement:
The main innovation of the PEC is to propose a “double” value added tax (VAT) model, that is to say composed of two taxes: one under federal jurisdiction – the Contribution on goods and services (CBS ) – and one under the responsibility of states and municipalities – the goods and services tax (IBS).
The CBS, as already foreseen in an executive bill currently under consideration in the Chamber of Deputies, will replace the current PIS and Cofins. The IBS, meanwhile, will result from the merger of the Tax on the movement of goods and services (ICMS), which belongs to the State, and the Tax on services of all kinds (ISS), which falls to the municipalities.
According to the text, the taxes will not be cumulative, that is to say they will only be levied on the added value at each stage of the production or marketing of the product or service, not recurring at each stage. of the production chain.
According to the CEP rapporteur, the option of double VAT was due to the perception that, in this way, the Union, States and municipalities will have more autonomy to administer their taxes. In addition, the model is supported by the Ministry of the Economy, which did not accept the idea of a single VAT for the three levels of the federation.
Each state and municipality will have the autonomy to set the IBS tariffs. The tax legislation will however be unique, defined in a complementary national law. This general text will define parameters such as the incidence base, the forms of imputation and the definition of the taxpayer for example, which will be standardized for the whole country.
The proposal also provides that the IBS rate will be uniform on all goods and services, with the possibility of exceptions and different regimes, which will be defined in a complementary law.
Although they are not specified in the PEC substitute, the rapporteur indicates in his report that the intention is to have differentiated tax regimes for:
operations with fuels, lubricants and tobacco products, which can be invoiced in a single phase, the provision of financial services, due to the difficulties of taxation of operations remunerated in the form of a margin under the normal debit and credit regime; real estate transactions – the rationale is that the real estate market is quite heterogeneous, involving rentals, direct sales, incorporations, acquisitions by natural and legal persons, commercial and residential properties, etc.
The complementary law should also institute special regimes, according to the rapporteur, for sectors considered to be important from a social point of view. Examples are cited:
agricultural, agro-industrial, fishing and forestry activities; products forming part of the basic food basket; cooking gas for residential use; basic, higher and vocational education; health and drugs; collective and regular public passenger transport; and acquisitions made by charitable social assistance entities.
Although the definition of most of the benefits is left to a complementary law, certain situations in which there will be differential treatment are already foreseen in the PEC – in the case of public procurement, the free zone of Manaus, the free zones of ‘export (ZPE) and the Simple Nacional.
The IBS will not focus on exports and will not integrate its own basis of calculation, which means that it will be calculated “from the outside”, and no longer “from the inside”, aiming for the transparency of operations.
principle of fate
In order to avoid the so-called “fiscal war”, in which states and municipalities compete for the establishment of large companies by granting tax incentives for tax collection purposes, the rapporteur in turn adopted the so-called principle of fate. In other words, the tax no longer belongs to the place of production, but is due at the place of consumption, that is to say at the destination of the transaction with the good or the provision of service.
Another change will be the creation of the Selective Tax (IS), which will replace the current Tax on Industrialized Products (IPI) and will have an extra-fiscal character, that is to say of regulation. According to the PEC surrogate, the tax will be levied on the production, import or sale of goods and services considered harmful to health, such as cigarettes and alcoholic beverages, or to the environment. Products intended for export will be exempt from the SI.
The tax will be borne by the Union and the collection will be shared with the States, the Federal District and the municipalities, according to the same criteria currently provided for the sharing of what is collected with the IPI. The rate will be defined in the ordinary law which will govern the new tax, but may be modified by the Executive within the limits provided for by the legal text.
The transition period between the IPI and the IS will also be defined by law, but the PEC creates barriers so that there is no overlap of taxes and that there is no increase in the tax burden.
Distribution among municipalities
Although the principle of destination modifies the distribution of resources between the States and between the municipalities, the rapporteur sought to preserve the participation of the revenues of the Union, of all the States and of the Federal District and of all the municipalities and the Federal District out of the total collected. .
In the case of CBS, there will be no change, since PIS and Cofins already belong to the federal government.For IBS, the percentages already in force for the ICMS part have been maintained, as well as the income tax and IPS installments which belong to states and municipalities, with only the SI being included in the basis for sharing with subnational entities.
However, a new criterion has been created for the allocation of the IBS share. Rocha explains that the current rule, which distributes resources in proportion to the added value in the municipality, loses its meaning, “insofar as the IBS is a tax on consumption and not on production”.
Thus, on the part of the IBS to be distributed to the municipalities, the calculation will follow the following proportions:
60% proportional to the population of the municipalities; 5% equally distributed among all the municipalities of the State; 35% linked to the provisions of state law.
Tax refund for low-income families
The substitute also provides for reimbursement of the IBS for low-income families, according to a mechanism to be defined in a complementary law. The identification of the target audience would be done through the Federal Government’s Single Register of Social Programs (CadÚnico).
The mechanism will replace measures such as the tax exemption on basic foodstuffs, which the rapporteur considers not to be the most efficient way to conduct a distribution policy.
“First, because there is no guarantee that the lowest tax will be passed on to consumers in the form of lower prices. Second, although the poor, in proportion to their income, spend more on food and other items essential to their survival, in absolute terms their consumption is lower than that of the richer segments of the population. Thus, the tax expenditures associated with the exemption of basic foodstuffs benefit the richest populations more strongly than the less economically advantaged, ”explains Rocha.
Regional development fund
Also instituted by a complementary law, it is planned to replace a Regional Development Fund (RDF), the resources of which can be used for “infrastructure projects, the qualification of workers, the preservation of the environment, ‘innovation and dissemination of technologies, as well as the promotion of productive activities with high potential for job creation and income ”.
According to Rocha’s proposal, the fund will be funded by a percentage of IBS income, which will vary depending on the actual increase in fundraising, not exceeding 5%. If the real income growth of the IBS is very low, the financing of the FDR can be supplemented with an additional tax rate, not exceeding 0.8 percentage point. Also according to the text, 30% of the amount will be allocated to municipalities and 10% to investments in infrastructure in the States of origin of primary products intended for export.
For the consumer, the transition period will be seven years. During the first two years after the changes take effect, the IBS will have a rate of 1%. From the third to the sixth year, the ICMS and ISS tariffs will be reduced by one fifth per year – the tax benefits will decrease to the same extent. At the same time, the IBS tariffs will be defined by the Senate so that the collection with the new tax is equivalent to the collection of the ICMS and the ISS. At the start of the seventh year, the ICMS and the ISS will be phased out, completing the transition to the new model.
As for the federal distribution of income, the transition will take 20 years in total, with a decreasing retention of part of the IBS for distribution among states, Federal District and municipalities. Another payment will be distributed according to the principle of destination, until at the end of the period, the entire collection is shared according to this criterion.
IPVA for ships and airplanes and IPTU update
The opinion also contains changes in the taxation of assets, the main one being the imposition of the Motor Vehicle Property Tax (IPVA) on water and air vehicles, such as speedboats, yachts, jets -skis, jets and helicopters.
Today, only owners of land vehicles pay IPVA. According to the proposal, the tariffs will be fixed by a complementary law, with the possibility of tax exemptions, incentives and advantages, in addition to tariffs differentiated according to the type, the value, the use and the moment of use. goods.
Commercial vehicles intended exclusively for businesses whose purpose is artisanal fishing, public transport of people or the transport of goods will be exempt, as will water vehicles intended for indigenous and local populations who use them for subsistence activities.
As for the Urban Land and Territorial Tax (IPTU), the senator proposes that the calculation base be updated at least once every four years, with the market value of the property as a ceiling.