New proposal for IR takes up to R$27 billion from state and municipal coffers

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The expected drop in revenue with the changes in the income tax will press state e counties, who will keep most of that account. The loss must be between 23 billion and 27 billion reais, according to calculations by tax experts consulted by the state. In reaction, the National Confederation of Municipalities (CNM) released a note classifying the new version of the text as a “scandal”.

The opinion of the project’s rapporteur, deputy Celso Sabino (PSDB-PA) foresees a total reduction of the load of up to 30 billion reais, as a result of measures such as cutting the tax rate. Corporate Income Tax from 15% to 2.5%. In practice, governors and mayors would assume between 77% and 90% of the total impact.

“It’s easy to do kindness with someone else’s hat,” said the director of the Tax Citizenship Center (CCiF), Bernard Appy. By his calculations, the reduction in revenue for governors and mayors will be around 23 billion reais. According to him, by concentrating the impact with the measures, the opinion goes against what would need to be done to improve taxation in the country.

The Constitution determines that 46% of income from the IR must be transferred to regional governments. Another 3% is earmarked for regional development funds.

According to the state, calculations being made by the states point to a greater loss, of up to 27 billion reais, 14 billion for states and 13 billion for municipalities.

The measures included by the rapporteur to compensate for the loss in revenue, such as the end of exemptions for 20,000 companies, are concentrated in taxes that are not shared with governors and mayors.

The Secretary of Finance of Rio Grande do Sul, Marco Aurélio Cardoso, demanded transparency in the numbers. “Our preliminary estimates show that 75% to 90% of the loss of tax revenue would come from the states and municipalities”, he says.

He points out that the Social Contribution on Net Income (CSLL) — a tax that is also levied on company profits, but is not shared between the Union, states and municipalities — was not altered in the project. According to Cardoso, the state coffers also lose with the correction of the income tax table for individuals, since the tax is retained on the servers’ payroll. According to his calculations, Rio Grande do Sul loses 10% of its income tax at source, or 300 million reais per year. If this value is extrapolated to all states, the loss would be between 7 billion and 8 billion reais.

The Finance Secretary of São Paulo, Henrique Meirelles, says that the São Paulo government will lose less because of the criteria for dividing the State Participation Fund (FPE), which imposes a smaller share on the state. According to preliminary calculations by Meirelles’ team, the loss will be between 50 million and 60 million reais. “But the states are complaining because the project is aimed at solving the federal problem, it is not a tax reform project at all”, he criticizes.

“We do not agree and we are deeply sorry,” said the president of the National Confederation of Municipalities (CNM), Paulo Ziulkoski. According to him, the organization is going to mobilize its base in Congress. “The report is a scandal, both because it relieves the income of the richest companies and people in the country, at a time when the world is trying to move in the opposite direction, and because it produces a hole of at least 30 billion reais in public accounts”, says the entity in the note.

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