BTG says the MP subsidy could impact retail profit margins

BTG says the MP subsidy could impact retail profit margins

BTG (BPAC11) assessed that Temporary Measure (MP) 1,185, which deals with federal taxes in cases of government subsidies to businesses, could impact profit margins in the retail sector, although businesses could raise their prices to try to partially offset the increase in taxes. . The bank notes that high household debt and compressed profits may limit the attempt to compensate through higher prices.

MP 1,185, in August, changed the system for using federal tax credits on incentives that states grant to businesses through Tax on the circulation of goods and services (ICMS). Currently, government investment subsidies are deductible from income tax and the CSLL tax base.

The text was recently updated to be processed by the Joint Committee in Congress, with the aim of turning it into law. For BTG, the changes “simplify the eligibility process and consolidate rental and rental expenses into the basis of the tax credit calculation.” But some points remain puzzling from the bank’s point of view.

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BTG notes that the most controversial change refers to credits used by companies in violation of Law No. 12973/204, which established investment support rules. As it turns out BroadcastingThe private sector began deducting state interest from the federal tax base even when the incentive was aimed at financing, not investment – ​​which would be unwarranted in the Treasury Department’s interpretation.

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The Ministry of Economy, according to BTG Pactual, agreed to allow companies to settle this debt themselves with discounts of up to 65%. Five installments and the remaining 95% payment at a 50% discount over 60 months or a 35% discount over 84 months.

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