Congress overturns Lula’s veto on payroll tax relief
Brazil’s National Congress overruled President Lula’s veto of a bill that extends payroll tax exemptions for 17 sectors with the highest employment in the country. The Senate voted 60 to 13 in favor of overturning the veto, while in the Lower House the tally was 378 to 78. Business organizations and workers’ unions believe this measure will help preserve jobs.With the veto overturned on Thursday (14), the exemption is now extended until December 2027. Had the veto been maintained, the payroll tax exemption would have expired on December 31 of this year.The payroll tax exemption scheme permits companies in these 17 labor-intensive sectors to substitute the 20% contribution on wages with a rate of 1% to 4.5% on gross revenue.Among the 17 sectors eligible for this tax model are the textile, footwear, machinery and equipment, animal protein industries, construction, communications, and road transport. These sectors collectively employ 9 million workers.During the plenary debate, the bill’s author, Senator Efraim Filho, emphasized that the proposal received backing from both the productive sector and workers. "It’s a win-win bill, supported by producers, workers, the productive sector, and unions. Everyone supports the payroll tax exemption because it sends a clear message: those who generate more jobs will pay less tax," stated Mr. Efraim.Before the session, Senate President Rodrigo Pacheco expressed his support for overturning the veto, noting that most lawmakers shared this sentiment despite the government’s efforts to uphold it."Regarding the exemption, I want to emphasize that this policy is already in place in Brazil for highly employable sectors. It’s something that already exists, and we are proposing to extend it, so I believe it’s appropriate," Mr. Pacheco told reporters.He believes that discussions on alternative government proposals should start only after the veto has been addressed. "In my discussions with parliamentarians, I’ve sensed a tendency towards overturning the veto. From there, we can start a dialogue with the government to find an alternative," he added.Soon after the veto was overturned, Finance Minister Fernando Haddad said the bill is unconstitutional, announcing that the government would appeal to the Supreme Court. The government argues that the bill violates the Constitution as it lacks a fiscal impact estimate, which is mandatory for creating benefits. However, constitutional lawyers and tax experts consulted by...
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