“There is no room for such a high tax cut” – 07/14/2021

Former Secretary of Revenue, Jorge Rachid, assesses that the opinion on IR reform, presented by MP Celso Sabino (PSDB-PA), has made progress with respect to the original proposal, but warns that there is no margin in the government’s accounts to allow for too high a drop in income tax companies. Rasheed says states and municipalities will also lose revenue if there is no compensation. Read the interview below.

What is the risk of revenue loss of R$30 billion in 2023 projected in the opinion?

It’s a big loss. The course indicates that it will seek sources of income from other sectors to be able to cover or even other expenses that are included to cover it. But in reality there is no fiscal space to allow such a high reduction. Especially at a time when other countries are striving for greater revenue, especially the US and the UK, charging companies more fees to cover the expenses of the pandemic and not to give up resources.

Is Brazil against the tide?

exactly. But there is a concern about public finances now, from the government budget. This should be taken into account in this assessment. But the most important thing is that progress has been made, and now he will enter the debate by distributing opinion to the leaders of the Chamber. Let’s wait for the discussions.

By lowering income tax, can states and municipalities not lose resources, as the tax is apportioned?

Yes, the offered balance is not favorable to the states and municipalities. Reduction in resignations, to a large extent, and a possible reduction in budget expenditures, does not affect the participation funds of states (FPE) and municipalities (FPM). The moral of the story. They will have a credit loss because income tax collection, which is the basis for FPE and FPM, will go down.

Can you vote this week as the chamber chair wants?

very Difficult. It’s a project that requires a great deal of attention because it involves more than R$100 billion in tax revenue cuts and with more than R$85 billion in compensation expected. Therefore, without a doubt, much attention should be paid to this presented alternative.

what mr. Have you thought about the significant reduction in corporate income tax?

The text of the decision has evolved significantly in relation to the proposal of the executive branch. Correcting some points that were wrong, such as requiring companies, such as property management and shopping centers, to leave the assumed profit (simplified tax system). It came. There was a big cut in corporate income tax, but the decision didn’t correct something that needed fixes: Profits calculated until December 31, 2021, when distributed next year, will be taxed. This is a big mistake.

Because?

Let me give you an example: a company with retained earnings now, in the second half, sees the economy improving and wants to wait to reinvest or distribute next year. As the economy improves, a company may, for example, want to expand its shed and hire 50 employees. It turns out that, with this formulation, if there is some uncertainty, if the company decides to distribute the dividends accumulated up to 12/31/2021 next year, it will pay the independent delegate on the dividend. This entrepreneur would not want to risk it. will now distribute. The standard should have as little interference as possible. There is no need to anticipate the situation. Remember that when it became exempt, profits made up to 1995, when distributed, were taxable.

Information from the newspaper State of Sao Paulo.