Tax reform conditions corporate income tax cuts to revenue increase – Prime Time Zone


Rapporteur of the text in the Chamber, Deputy Celso Sabino (PSDB-PA), says that the inclusion of ‘triggers’ ensures that changes do not reduce transfers to states and municipalities

PixabaySecond stage of the tax reform provides for offsetting the drop in income tax on companies with the taxation of profits and dividends

The rapporteur of the second stage of the tax reform in the Chamber, deputy Celso sabino (PSDB-PA) delivered this Tuesday, 3, the final version of its opinion for the changes in the Income tax for Legal Entities (IRPJ), Individuals (IRPF) and the financial market, in addition to guidelines for the beginning of taxation on profits and dividends. The text guides the cut of 7.5 percentage points in the taxation of companies from 2022, going from the current 15% to 7.5%. A new cut of 2.5 percentage points can be applied, as long as the revenue calculated until October this year is greater than that registered in the same period last year, corrected for inflation. The mechanism repeats itself from 2023, with the same period of comparison. If the conditions are met, the total cut will be 12.5 percentage points, leaving taxation at 2.5%. The text maintains the additional 10% charge for companies that earn more than R$ 20 thousand per month and does not change the additional 9% tax on Social Contribution on Net Income (CSLL). In the first version of the report, the deputy had proposed a 12.5 percentage point cut in the first year, plus a 5 percentage point cut in 2022. The text proposed by the Ministry of Economy was even more modest, with two cuts followed by 2 .5 percentage points in 2022 and 2023.

According to the rapporteur, the ‘triggers’ aim to comply with the request of States and municipalities that stated that the tax reform would impact on the reduction of transfers. “We are placing 7.5 percentage points directly and 2.5 percentage points linked to the achievement of this year’s collection, corrected for inflation, and then it would reach 10% next year. Next year, if we beat the inflation-adjusted collection again, we would give another 2.5% for 2023 reaching 12.5%, this way we guarantee that there will be no drop in income tax collection and by consequence guarantees that we will not have a drop in transfers”, said Sabino.

Earlier, the National Committee of Secretaries of Finance of the States and DF (Comfaz) released a statement criticizing Sabino’s proposal and asking for the text to be shelved. The group claims that the measure will bring losses of R$ 26.1 billion to states and municipalities from 2023. “This proposal aggravates the problems of Brazilian federalism, concentrating even more public resources in the Union and subjecting national entities to an unsustainable fiscal imbalance.” According to the organization, the original proposal “was based on neutrality”, but the “last version of the substitute, by giving in to the designs of pressure groups with greater representation power, extended technically unjustifiable exemptions and will result in reduced revenue for all entities, putting into question the financing of future public services.”

Matter being updated